When you buy any kind of real estate there are several things that you have to do. One of them is that you have to go through escrow. If you have never bought a house or any kind of property, you might be confused as to what escrow is. It can be confusing. You really need to know what it is and how it works.
What Is Escrow?
Escrow is a protection that is put in place for the benefit of everyone involved in the purchase process. Escrow really isn't just one thing, it is actually an entire process.
How Does Escrow Work?
The way that it works is that you and the seller sign a purchase contract. That's when the escrow process opens. Once the process has started, you need to put a deposit down. You aren't giving it to the seller. Instead, that deposit goes to a neutral third party. They hold on to that money until the entire purchase process is completely finished. At that point, the neutral third party will make sure that the seller gets the money. That third party can vary, but it is often an escrow service or lawyer.
No money will officially change hands until every part of the contract for the purchase as been met. The terms can include a number of things. For example, if the building needs some repair work done, the contract may state that the seller needs to have that done. The contract will also state which kinds of documents need to be provided. Those would be things like a clean title, results of home inspections, and mortgage insurance.
Once all the terms of the contract have been met, the escrow process can close. People often talk about closing on their house. People also talk about having to pay closing fees or closing costs. Since escrow is a service offered by that third party, there are fees involved with it. How much those fees are depend on a lot of things, including what state you are in and the purchase price of the house. Generally you and the seller will have negotiated who will pay what costs.
There are a lot of steps when it comes to buying your house. Some of them can be difficult to understand. However, you can't pass up on those things. Escrow is one of the things you are going to have to deal with. Knowing what it is will make buying your new property much easier.