What You Need to Know About Escrow, Inspections and Appraisals in Real Estate

If you’re about to purchase your dream home and you have gone under contract with an executed agreement, you’re probably familiar with the term ‘escrow’. However, if you’re a new home buyer and are not familiar with this term, don’t worry, you’re not alone. Escrow is a term commonly used in the real estate industry, but not many people know what it entails. In this blog post, we will cover what escrow means, how it works, and what you need to know about it as a new home buyer.

What is Escrow?

Escrow refers to a neutral third party responsible for holding money or assets during a real estate transaction by acting as an intermediary between two parties. This neutral third party could either be an escrow company, real estate attorney, or a title company. The purpose of escrow is to ensure the smooth and secure transfer of funds and property deeds between the buyer and the seller. Escrow also helps to ensure that the transaction follows all necessary legal and financial protocols.

How does Escrow work in Real Estate?

When purchasing a property, it's important to have a solid agreement with the seller. It's important that during this process you keep written records of all agreements, including verbal ones (make sure your agent gets these in writing). We'll help you draft the necessary paperwork and make sure you have copies of everything. We will also make sure that you stick to the schedule during escrow as outlined in the contract. Meeting deadlines will prevent any breach of agreement.

When a buyer and seller agree to terms on a purchase, they authorize their escrow agent to hold any pertinent documents and all the money involved until both parties have met every requirement laid out in the contract. All the documents and payments are kept in an escrow account, which the escrow holder's holds in trust. Once the closing date has been reached, the escrow holder will disburse the funds and transfer the title into the buyer's name.

What do I need to know as a buyer?

As a buyer, it is essential to be aware of the following things while dealing with escrow:

1. Timeframe: The escrow period lasts between 30 to 45 days on average. The duration could be shorter or longer, depending on the specific needs of the buyers, sellers and types of financing.

2. Escrow Agent: It is vital to choose a reputable and licensed escrow agent to avoid any mishaps or complications during the transaction, although most of the time, the title company, or attorney closing the transaction will hold the escrow.

3. Escrow Fees: The fees for escrow services are typically split equally between the buyer and the seller, although this can be subject to negotiation between parties.

4. Contingencies: There may be certain contingencies, such as home inspection, appraisal, or loan approval, included in the contract. The escrow process cannot be complete until all contingencies have been satisfied.

5. Closing Costs: As a buyer, you will be responsible for paying closing costs, including escrow fees, title fees, and other expenses associated with the transaction.

Escrow is a crucial part of the real estate transaction process. As a new home buyer, it is essential to understand the role escrow plays in ensuring a secure and seamless transaction. With the right knowledge and preparation, escrow can provide peace of mind and a smooth buying experience. Remember that choosing a reputable and licensed escrow agent is vital. With that being said, we hope that this blog post gives you an insight into what escrow is and how it works in real estate.

Along with escrow, the second most important part of the transaction is the inspection period and the different types of inspections performed. 

Posted by Alexandré Worthington on
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