Escrow is a fact of life for many people, especially mortgage escrow accounts. Often, your escrow account simply runs in the background. You might not give it a second thought unless something goes wrong. You make your mortgage payments, some of it goes to the lender, and the other goes to the escrow service. Eventually, that money in your escrow account is used to pay your homeowner’s insurance and property taxes.
Many people have an escrow account because their lender requires it when you purchase a house. In fact, most lenders require first-time homebuyers to have an escrow account. It’s a way of helping lenders protect their investment and it makes it easier for you, the homeowner, to budget for expenses like your homeowner’s insurance and property taxes. Think of it as a savings account.
Escrow accounts are designed to protect lenders, but they also have benefits for homeowners.
Let’s take a closer look.
How Escrow Really Works
The escrow agent is essentially a third party. It could be an attorney, a title company agent or even a real estate closing company.
The whole idea is to ensure everything during the transaction runs smoothly. That includes the transfer of documents and money. Escrow is designed to protect all relevant parties in the transaction by making sure that no funds from the lender and property change hands until each and every condition in the agreement is met.
During the process of buying a property, all the proper documentation is filed with your escrow agent or company as each step toward closing can be ticked off your list. Some particular contingencies that may be part of the process include repairs, home inspections and any other tasks that must be completed by either the seller or the buyer.
Every time a step is completed, you can sign off with a contingency release form. The transaction then moves forward, edging closer to closing.
When all the conditions are met, the transaction is then finalized, and any money due to the seller is transferred from the lender to the seller. Escrow, meanwhile, clears the title, and that means the buyer officially owns his or her new home.
How Escrow Benefits You
Escrow offers a myriad of advantages.
The Buyer Benefit
For buyers, escrow tracks the process and verifies when it is completed. The seller isn’t paid until you accept the terms and all terms are then met.
The Seller Benefit
Escrow confirms when each stipulation has been met and the sale is closed. Sellers can only pay once escrow verifies the funds.
A Lot Less Worry
Escrow understands that uncertainty is never good. Buyers and sellers can rely on the brand to ensure payments are protected every step of the way.
Safeguarding Your Money
When a transaction happens behind the safety shield of escrow, you’re assured your funds are protected by escrow’s straight forward payment steps.
Making Sales Easier
Buying or selling a property should be a fun time. Escrow ensures sales are protected from fraud or underhanded management.
The Cost of Escrow
How much escrow costs tend to vary. It also depends on whether the seller or buyer pays. The fee for the service usually stands at around 1 to 2 percent of the cost of the property.
Is An Escrow Account for You?
Taking a look at the list of benefits an escrow account offers, especially in terms of safety, there’s no doubt that an escrow account is a must for property transactions. It’s also usually mandatory from the lender’s side.
Some lenders just won’t give you an option of not having an escrow account, unless you’re able to prove you have enough funds on hand or you already own a percentage of the property.
There are plenty of other reasons to make use of an escrow account, too, most of which boil down to convenience. If you’re a homeowner, you simply make a monthly payment and let escrow take care of everything else. You can set it on autopilot and not worry about meeting payment deadlines. What’s more, owning your home also reduces the risk of escrow charging, reducing even more worry!
Escrow is peace of mind for you and a property lender and is an essential part of the transaction process.
Make sure you have an Escrow attorney on hand to help you through the process. Book a consultation with the Principal Law Firm today!
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