Buying a Home - Understanding Escrow

A Home Buying Article Contributed by Mark Vanner

Buying a Home - What is Escrow?

If you are a first time home buyer, there is a good chance that you have noticed the word 'Escrow' mentioned on real estate and mortgage lender websites across the internet. However, it is very rarely explained and many home buyers don't understand what Escrow is and what it can do.

Essentially, Escrow is a deed or financial deposit transferred from one party such as the home buyer to another (the home seller or mortgage lender) with the assistance of The Escrow Company acting as a neutral third party who hold the deed or financial deposit. This process takes place at the closing of the home buying process. When the conditions of the transaction proposed by the home buyer and seller have been met, Escrow deposit the funds and deeds accordingly.

Buying a Home - What Can Escrow Do for Me?

The Escrow Company act as a neutral party working for both the home buyer and seller. Escrow provide an assurance that no money or property will be exchanged before all requirements in the purchase contract have been met. The funds and documents will be safeguarded by Escrow until this time allowing greater security for both the home buyer and the seller.

Buying a Home - the Escrow Process.

Under most circumstances the buyer and seller will put into writing, transaction instructions for Escrow to follow on completion. Once the instructions have been agreed upon by both parties, signatures will be attached to the documents and the papers should then be delivered to the Escrow officer.

Once the documents have been received by the Escrow Officer, they will be processed and left until the time all instructions and transactions have been met and your Escrow account will then be closed.

Escrow - Buyers Responsibilities.

As a buyer you will have a number of responsibilities such as carrying out an approved inspection on the property you are seeking to purchase. During the inspection you should note down any discrepancies such as property damage or environmental issues and make your Escrow officer aware of these. You must also present the seller with a list of these issues you wish to be resolved before the end of Escrow.

Also you will be required to make a good faith payment to the Escrow company within three working days of accepting their offer. The payment is usually around three percent of the properties value. The buyer is also responsible for signing the necessary documents and covering the down payment fees on the property at the closure of the Escrow.

Escrow - Sellers Responsibilities.

You should expect the seller to deliver an accurate disclosure concerning any damages or problems regarding the new premises including a natural hazard disclosure report which is prepared by one of the many companies that deal with assessing the risks of possible earthquakes, floods, landslides and fire risks in the area where your new house is situated.

The seller will also be responsible for checking and completing a number of documents which will be provided by Escrow and making sure that the house is kept in the same condition in which the buyer viewed the property.