Escrow is an important concept to understand if you're going to buy or sell a home. It helps protect both the buyer and seller by ensuring that all conditions of the sale are met. But what exactly is escrow? Today, we'll go over the basics of escrow and what it means for buyers and sellers alike. Keep reading to learn more! 

What Is Escrow? 

A third-party service that ensures that all conditions of a sale are met before any money changes hands. The buyer puts their payment in escrow and the seller does not receive the funds until certain conditions are met. These may include things like verifying that all repairs have been made. Making sure that all taxes and bills relating to the property have been paid off. And verifying that inspections have been completed. Once these conditions are met, then the money can be released from escrow and delivered to the seller. 

How Does Escrow Work? 

When a buyer makes an offer on a home, they will usually provide an earnest money deposit along with it. This is typically around 1% – 3% of the purchase price of the home and serves as evidence that they are serious about buying it. The earnest money deposit is then placed in an escrow account. A real estate agent or attorney act as an intermediary between both parties involved in the transaction. After inspections are complete, financing has been secured if necessary, title work has been done, repairs have been made (if requested), etc., then both parties will sign off on their respective documents (the contract) and agree on closing costs. It's just a matter of waiting for funding from the lender.  

Who Pays for Escrow Fees?   

The party responsible for paying escrow fees varies depending upon state laws; however, typically either one party pays them outright or they're split evenly between buyer & seller at closing time. The amount charged for escrow services also varies depending upon where you live; some states charge up to 1% while others charge much less (or nothing at all). Be sure to check with your local laws prior to entering into any real estate transactions. 

Bottom Line 

Escrow plays an important role in real estate transactions as it helps protect both buyers and sellers alike by ensuring that all conditions of a sale are met before any money changes hands. Now you know how it works - and who typically pays for it - so you can feel confident when buying or selling a home! Whether you're looking for someone to act as an intermediary between yourself and your potential buyer/seller or want more information about how escrow works in your state specifically, contact one of our experienced mortgage advisors today! They'll be able to answer any questions you may have related to escrows so you can make informed decisions throughout your entire transaction process!

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