The Commonwealth Blog

Monday, June 17, 2019

Explaining the Escrow Process

Escrow can be intimidating, but it doesn’t have to be. Read on for more information about its many moving parts, involved parties, and tips for making your next escrow smooth and easy.

What Is Escrow?

The escrow period begins when you sign a housing contract and ends when you close. Escrow safeguards both parties from risk, protecting buyers’ and sellers’ assets before closing on a property. After making an offer on your home-to-be, your earnest money will be placed in the hands of a third party until both you and the seller finish negotiations and close the deal.  

Here are several reasons why you’ll want an impartial third party to hold onto your money before closing:

  • To prevent your earnings from being held hostage by the seller in case they try to renegotiate with your money in their hands.
  • The seller won’t close before you’ve paid your dues, but you won’t give them your money until all negotiations are through and contracts have been signed. With escrow, both parties can follow through with their own end of the bargain at the same time.
  • You may have entered into a “rent-back” agreement (requiring the seller to pay you a specified rate for staying in the home longer than anticipated). An escrow agent can hold back a portion of your escrow fees until the seller moves out of your new home and you can make sure it’s in good condition.
  • Funds can also be held in escrow if the seller hasn’t completed home improvement projects within the agreed-upon time frame or if you’re purchasing a newly constructed home that hasn’t been completed on time.

What About Lenders?

Your mortgage lender also uses funds to pay for your homeowners insurance and property taxes, collecting these fees along with your monthly payments. Funds used for paying tax and insurance are called escrow or impound accounts and reserves—these terms mean the same thing and are used interchangeably. The term “prepaid” also describes money that lenders collect in advance to pay for homeowners insurance and property taxes.

Closing

The closing of escrow happens after all the necessary documents have been signed and recorded, all the agreed upon conditions have been met, and the money has been properly allocated to all parties. An escrow officer oversees all final steps, including the exchange of funds and recording of deeds.

Buyer and Seller Escrow Tips

To make escrow more straightforward, we recommend buyers and sellers follow these suggestions:

  • Buyers should document all their finances and organize financial paperwork before going into escrow to speed up the process.
  • Buyers and sellers should be easily reachable by phone to answer questions from agents and lenders or be informed of any missing documents or papers that need to be sent in promptly.
  • Sellers should protect themselves from last-minute surprises by requesting a title report before putting their house on the market.

Ask Questions

Escrow gets more complicated if you forget to sign any documents or retrieve the necessary paperwork. Reach out to your bank, escrow company, or agent to make sure you have everything in order. Going into escrow confidently will speed up the process so you can move into your new home by the agreed-upon date.


Loading Property Compare
Perfect Fit Buyer Registration
Request a Home Evaluation

Mobile Search

Use any internet enabled phone to search every home for sale in our area! More

Homes Like Mine

Find the approximate value of your home by comparing your home’s criteria to homes that are currently for sale.

COMPARE NOW

FREE
Home Updates

SIGN UP

This Week

Open Houses 4163 New Listings 2482 Bank Owned 704

These Listings Updated Daily

Boston Real Estate by City

Berkshire Hathaway HomeServices Commonwealth Real Estate | 12 Huron Drive, Natick, MA 01760 | Phone: (508) 810-0700

© 2019 BHH Affiliates, LLC. An independently operated subsidiary of HomeServices of America, Inc., a Berkshire Hathaway affiliate, and a franchisee of BHH Affiliates, LLC.
Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.® Equal Housing Opportunity.
Information not verified or guaranteed. If your home is currently listed with a Broker, this is not intended as a solicitation.

Terms of Use/Privacy Policy | Agents Only | Library
Built and powered by Constellation Web Solutions