Kingston Mortgage Explains Escrow
As you come close to the end of the home buying process, you will go through escrow. Escrow occurs after the seller selects an offer, but before the sale is finalized. Kingston Mortgage experts hope our article will clarify any questions regarding escrow.
What is Escrow?
Escrow is a process where a neutral third party, known as an escrow officer or escrow agent, monitors a real estate deal until the terms of the contract are finalized between both sides. During this period, the escrow officer will have all important documents and deposits in their care. They will hold all money and property in a neutral account until the conditions for the sale are met. The involvement of an escrow officer is necessary to ensure that closing goes smoothly. An escrow officer will charge their own fees for their services during escrow.
How Does Escrow Work?
Once a buyer and seller initially arrive at a purchase agreement, they must select a neutral third party to act as an escrow agent/escrow officer. This agent will collect “earnest money” from the buyer. As a reminder, earnest money is money which is paid to confirm a contract. In a home buying situation, “earnest money” is a deposit that it is equal to a small percentage of the sale price. The buyer will give the deposit to an escrow officer in exchange for the seller taking their property off the market. Until the contract between buyer and seller is finalized the money and property are in considered to be in escrow. Once the conditions of the contract are met, the escrow agent will record the deed and title transfer to finalize the purchase of the home.
Where Does the Money Go in Escrow? Can I Get My Money Back from Escrow?
The short answer is it depends.If the buyer cancels the home purchase under the conditions stated in the contract, they can receive their money back. This refund may not include any fees, or charges for appraisals and inspections. The contract may include conditions such as an acceptable time period for canceling the deal.
However, if for any reason, the buyer is not eligible to receive a refund, then the funds will be transferred to the seller.
What is an Escrow Agreement?
An escrow agreement is a legal document which stipulates the terms of an agreement between a buyer and a seller. The contract will define how much money the buyer needs to put into escrow, what property is being sold, and the acceptable uses for the deposit made by the buyer. The escrow agreement will also include detailed information about the escrow agent, such as who the escrow agent is and what their fees are.
What are the Uses for Escrow Agreements?
In general, an escrow agreement allows the buyer and seller to feel at ease that the other party can complete their portion of the agreement. After the buyer deposits money into the escrow account, they will be able to move forward with a home inspection to evaluate the state of the home. As the seller proceeds to home inspection, the seller will hand the deed over to the escrow agent.