Escrow: How To Use It

Escrow is a term that will inevitably be discussed during the process of purchasing a house. Putting a down payment on a home initiates the buying process. As there are several steps necessary to complete the process, it is important to protect this down payment. Hence the purpose of escrow, which is an account opened and maintained by an unbiased third party, which is not associated with the buyer or seller in any way. An escrow agent can be recommended by a broker, but the decision as to who is hired should be a mutual decision made by both the buyer and the seller.

It is not required to use an escrow agent in real estate, but you will have a hard time finding a bank or lending institution that does not require escrow. This is due to the size of funds which is changing hands in the transaction. Escrow acts as a safeguard against either side not honoring the conditions of the transaction.

Escrow: Things to Keep in Mind

When escrow proceedings begin, make sure to have your photo identification available, as well as the contact information of your home insurance providers. Closing usually occurs within one to two months, and the creation of the account provides guarantee that the money placed in escrow will not actually be disbursed until all terms have been met.

Purchasing a home can be a hectic and nerve-wracking time. You will need to secure homeowner’s insurance and have your new home inspected and assessed for financing. It is important that you keep in touch with your escrow agent. Do not be afraid to call him or her with any questions, that is their job. An escrow agent can explain all escrow-related matters so that you will be able to understand and meet any deadlines. If there are obligations the seller has agreed to, you must inform the agent if you are not satisfied. Make sure to inspect each document for correctness, and inform your agent any changes that need be made for accuracy. Just like closing fees, escrow costs can vary depending upon where the contract is being executed and the company handling it.





Escrow is not limited to real estate. Almost any type of valuable property may use escrow to ensure the transaction goes according to plan. Business sales can also use escrow accounts. Beware of escrow fraud, however. Some online escrow agents are fraudulent, so make sure you are dealing with a real company. Find out the company’s address and telephone number to make sure it is located in the United States. Call to talk to an actual agent, and question him about his experience. You may also want to check with the Better Business Bureau to make sure the escrow agent is a member.

If for any reason the original date of closing cannot be met, escrow can be canceled. Documentation from both parties must be presented attesting to the need to cancel, and a fee may be charged for a return of the funds. However, assuming both buyer and seller have fully met the list of conditions prior to closing; escrow can now come full circle and be dispensed.

It is unlikely that escrow agents will hold onto files indefinitely, so make sure you have copies of everything. You will need to show the escrow documents to your tax preparer when you file taxes. Of course, when you purchase any property, you should always keep every paper relating to the sale for your own records.

Escrow and closing proceedings can take a significant amount of time, and can be disrupted if there is an illness or other interruption. The primary goal is that buyers and sellers keep proceedings rolling in a timely manner. By staying informed, and making sure your needs as a buyer are satisfied, your escrow will soon turn to ownership.

If you are ready to buy in the San Diego area, check out affordable Poway homes for sale. If you want a more rural location, try Pine Valley real estate. For more information about San Diego communities, visit our blog: California Community Guide.

Escrow: How To Use It / Author: Karen Bellas