Large monetary transactions can be quite daunting when you are dealing with people you may not know personally. This rings true in many daily transactions as well as in the Real Estate Market. Whether you’re dealing with a large online purchase or a real estate transaction, understanding escrow is critical to help minimize your risks.
Escrow is an arrangement with a neutral third party who will not benefit in any way and is merely there to ‘moderate’ and make sure all parties involved are following the terms of the transaction. This can be as simple as a buyer agreeing to buy a product or service that the seller agrees to provide. In real estate, this can be a bit more complicated with specific terms needing to be met before the property changes hands. For Example:
- A buyer has the right to ask for a home inspection on the property to ensure the home is in the condition they have been promised.
- A seller may ask for earnest money to help ensure they will get paid once the transaction is complete
This is where a real estate escrow provider comes in to essentially ‘referee’ and make sure all terms of the transaction are followed and delivered. Once the agreement is signed, it is delivered to an escrow officer, often recommended by your realtor, and is monitored to ensure a fair transaction for all parties involved. They can verify that inspections, disclosures, and objections, are handled and resolved in a timely manner.
A request by the seller for earnest money is often the first time escrow will come up in a real estate transaction, but not the only time. Who will hold on to the earnest money and deliver it once the transaction is complete? Your escrow officer of course. The buyer will write the earnest money check out to the escrow officer who in turn holds it until the agreement is finalized. If the buyer had to pay the seller earnest money directly, they would be taking a significant risk. Once all terms have been met and both the buyer and seller are satisfied, escrow closes, and the transaction is completed.
Reach out to your team at Carter and Associates to learn more. We are here to help – every step of the way.