VIDEO: What Is Escrow?

You’ve probably heard of it, but like Worcestershire sauce, you aren’t sure what it is or what it does. Escrow companies play an important role in home buying / selling process. In the context of real estate, their primary function is to act as a disinterested third party to a real estate transaction, holding the “asset” during the transaction, facilitating the flow of information and monies between the buyer and seller.

Why are escrow companies necessary?

Often times during a real estate transaction, both the buyers and sellers need to meet certain conditions before the property can exchange hands. For example, the buyers are often required to procure a loan to pay for the property. Another example is when a seller needs to make improvements or fixes to the property before the completion of the sale. The escrow company is the body that can ensure that these conditions are met and that neither party receives unjust treatment.

One final use of escrow companies is by banks or other loan making institutions. Often time these institutions require borrowers to include with their monthly loan payment a sum equal to 1/12th of the homeowners annual insurance premium and real estate taxes. That way, when these items come due the bank will have funds available to pay them in a timely manager. Since the property is the security for the loan, the bank wants to make sure they have their bases covered in the event that a homeowner doesn’t pay their bills.

So which escrow companies can you trust to help you or your friend through a real estate transaction? Give us a call and we’ll let you know!