What Is Escrow and How Does It Work?
Simply put, escrow is the process when a neutral, third party is in charge of holding something of value—usually cash—until a transaction between a buyer and seller is complete. Think of escrow kind of like a referee in a football game. They take no sides and make sure everyone is playing by the rules until the game is over. But the name of the game here is real estate.
If you’re a home buyer or seller, being in escrow means different things:
* As a buyer, you agree to pay a percentage of the price of the property into escrow for safekeeping.
* As a seller, you agree to take the house off the market while it’s in escrow and make it available for inspections.
The main job of escrow is to ensure a fair and smooth real estate deal from beginning to end. You can use escrow accounts for other transactions like online shopping purchases (where the escrow service holds onto the money from the buyer until confirmation that the goods have been received).