Escrow is a term that will undoubtedly be discussed during the course of purchasing a house. Putting a down payment on a home begins the buying process. As there are several steps necessary to complete the process, it is important to guard 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.
Selecting an escrow agent is a joint decision between the buyer and the seller, usually the realtor has one that they recommend.
Make sure that the agent you choose has experience in handling escrow. Also, before agreeing on an escrow agent, it is wise to investigate the company the agent works for.
Is Escrow a Requirement?
You are 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 amount of money which is changing hands in the transaction. Escrow acts as a defence against either side not honoring the terms of the transaction.
Escrow: Things to Keep in Mind
Once escrow actions begin, be sure to have your photo identification and bring along the information on the home insurance you are purchasing.
Closing normally occurs within 30 to 60 days, long enough for you to get financing and the seller to meet his obligations, and the escrow account provides a guarantee that the money placed in it be paid out when all terms of the contract have been fulfilled.
Buying 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 execute 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.
Once the transaction has been completed, you will receive a closing statement from the agent. This statement will show the money you paid into the account, the escrow agent's fee, the price of the property, and any other claims on the property, such as liens.
If you have overpaid, you may also receive a refund check.
Once you have received the closing statement, do not lose it. You will need to provide it to your accountant, to ensure accuracy on your tax returns. Also, the Internal Revenue Service may want to see your closing statement to prove that you paid the money you state for the property.
