November 02, 2021 at 10:38am | Jesse Gustin

Escrow 101: What is escrow? How does escrow work?

    When you are ready to purchase a new home, especially for the first time, you are going to run into unfamiliar terms. Escrow is at the top of the list. Escrow is when a neutral third party secures the money during a real estate purchase. Working with escrow during a real estate transaction assures that both the seller’s and purchaser’s funds are protected. The first step of the escrow process is opening an escrow account.

    Once the seller and purchaser reach a price agreement on the home, and sign a purchase agreement, the real estate agent will obtain the purchaser’s earnest money – essentially promissory funds which is eventually used toward the down payment – and deposit into the escrow account. The escrow amount typically varies from 1% to 3% of the total purchase price. The escrow company safely secures the funds until closing is complete. The duration of the closing of the closing period determines the time that the funds sit in the escrow account. While the funds are in escrow, neither the buyer nor the seller can access them. If the real estate purchase were to fail for some reason, the funds will be deposited depending on the real estate contract.

    You play critical part in the transaction process, whether you are the buyer or the seller. As the buyer, you are expected for depositing the funds to the escrow account on time. Additionally, there are a few things both the buyer and seller can do to make the process easier:
  • Carefully read all sale-related documents until you completely understand them. Ask your real estate agent or lender any questions you may have while going over your documents.
  • Make sure that you are reachable and that you promptly respond to any questions or complete any necessary steps to ensure the process is moving forward smoothly.
  • Closely read through the closing documents so that there will be no issues or last minute questions once the deal is ready to be completed.
  • Keep and secure your closing documents in a safe place for administrative and tax purposes.
    It may seem like the escrow process is just another costly hurdle in the closing process, its interest for both buyer and seller make it an important part of the process. During a major transaction, such as buying or selling a home, the more security both parties have in the place, the better. As your real estate agent in Port Orange, Team Zimmerman will support you during every step. If you have any questions about escrow or buying and selling a home in Port Orange, please contact us today at (386) 871-7949
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