Buying a new home is an exciting time in most people’s lives. However, there are a lot of things most first-time homebuyers don’t know. One of those confusing items is escrow.
Essentially, real estate escrow is when a third party holds the funds for the purchase in an account. This party is neither the buyer nor the seller nor their respective real estate agents. Usually, an escrow service company handles the transaction ensuring both parties meet the requirements before funds are released. The seller does not receive their funds for example until your home loan is funded and any fees they had to pay have been deducted. If you have questions about escrow accounts, a real estate attorney Austin TX can help you set up one or answer those pressing questions.
Often, the buyer continues to have an escrow account as part of their mortgage. If you do not have a home mortgage, you may still want the benefits of an escrow account to pay for property taxes and homeowner’s insurance. The company takes monthly payments and then pays the lump-sum payments to the respective entities. An escrow account helps the mortgage company feel confident that the borrower maintains homeowner’s insurance and pays their taxes. Failure to properly insure the home is a risky investment for the lender. A tax entity can put a lien on the home and cause the home to go under foreclosure or short sale to pay off those taxes. Escrow accounts can help eliminate some of that risk.
Beyond real estate transactions, escrow accounts are used to help take some of the risk off of large transactions especially those done online. Scammers can make trusting an online company difficult making an escrow account a safer option for online transactions. The escrow company uses an agreement between the buyer and the seller. Once both sides complete their part of the transaction, the funds are released. This provides a failsafe for both the buyer and the seller.