An escrow is a contractual financial arrangement, where more than three people involve in the process of completing a payment transaction upon completion of the agreement. Between the two persons involved in a transaction, there comes an escrow company which is the third party that holds and regulates remittance of the funds required for two parties. This process guarantees a secure transaction by keeping the imbursement in a secure escrow account. The amount is only released when all of the terms and conditions of a contract are met and it is confirmed by the escrow company.
In simple, the escrow company acts as the most trusted third party in monetary transactions makes them safe and secure. It collects the amount, holds, and disburses the same only when both the seller and buyer are satisfied.
How it works?
- Buyer and seller agree to a pre-defined set of terms.
- Buyer pays the escrow company
- The seller will ship the merchandise to the buyer
- Buyer accepts the product ordered
- Escrow pays the seller
The escrow period usually lasts between 30 to 60 days and sometimes it depends on the merchandize that needs delivery, that being said, it can be less if you pay all cash too (this will be explained in the latter part of the article). By this means, both the buyer and the seller will not have the concern of being stuck in the middle of the transaction or what to do next. You can log into your escrow account and check for the status and you will be updated as of exactly where you are in the transaction process and if there is anything that is required from your side- as simple as that!
How escrow works in real estate?
Several real estate connoisseurs often get bewildered when it comes to knowing how Escrow payment work for selling a home, this will not be the case anymore. Let us get down to the brass tacks of it. As far as escrow in real estate is concerned, four people come into play, i.e. buyer, seller, lender, and borrower. Having said that, the escrow instructions will be in writing to sign and deliver. When a broker is involved in this scenario, he/she will provide with the necessary information for the escrow’s document preparation. In conjunction with the escrow instructions the escrow officer will process the same and when all conditions are met, the transaction will be closed. Even though, there is a similar pattern, the escrow differs in some respects, seeing that it deals with your property and the transaction at hand.
Listed below are some of the duties of an escrow holder and it includes:
Following the commands given by the principals (buyer, seller, lender, and borrower) and parties to the transaction in a well thought-out manner
- Maintaining the documents and handling the funds in conjunction with the instruction
- Paying all bills and maintaining them as endorsed
- Responding to authorized requests from the principals
- Closing it when all terms funds in agreement with commands and provide an accounting for same
- The closing or settlement statement
DC Fawcett is the creator of Virtual Real Estate Investing Club. You can get to know about what’s viable in today’s real estate market scenario here. DC Fawcett is very active in his real estate deals including rehabbing houses, wholesaling etc.