Talking Escrow Basics With our Real Estate Lawyer
Purchasing real estate can be a complicated procedure, especially if you’re a first-time buyer or novice in the real estate industry. Hiring a reputable real estate lawyer is highly advantageous and can help you get through the real estate closing process with peace of mind. In a previous post, we looked at important things to consider during your real estate closing, including setting up an escrow account. But what is an escrow account, and why does it matter?
What is Escrow?
According to the Merriam-Webster dictionary, an escrow is “a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition”. Put simply, an escrow is a temporary holding account, held by the designated escrow agent for any kind of transaction. In real estate, it has two distinct applications:
- When purchasing property, the escrow is an account held by a neutral third party (like your real estate lawyer, Title company, real estate broker or agent) which holds the money for the transaction while the buyer and seller negotiate and carry out the requirements of the terms of the sale. This protects both parties: the buyer deposits the money but the escrow agent does not pay the seller until the title or deed is finalized; the seller is assured that they will receive their money from the third-party account once the sale is completed. The escrow agent may also hold the title to the home and any other important documentation until the sale is final and complete.
- Once you own a property, you may have to open an escrow account to manage the payment of property taxes, hazard insurance and mortgage payments. The property owner makes monthly payments into the escrow account, which then acts as a kind of ‘savings’ account to pay for taxes and insurance alongside their mortgage. This kind of escrow account is usually set up and managed by your money lender, and acts as an insurance for them in case the property is damaged or destroyed, or if the property is seized because you are unable to pay your rates and taxes.
Advantages of Escrow Accounts
At Florida Home Title Company, we handle the first kind of escrow. Having a professional real estate lawyer to manage your escrow has its benefits:
- The third party, also known as the escrow holder or escrow agent, is responsible for making sure that all the relevant terms and conditions are met before any money or property changes hands. It is their job to collect and manage the funds, oversee the transaction, and ensure that all the relevant paperwork is completed properly. They may also negotiate communications between the different parties involved (like the buyer, seller, agents, lenders, etc.) and pay any necessary fees associated with the transaction. You need a qualified and experienced lawyer or agent to manage all these different aspects of the deal.
- The escrow holder must also act in the interest of both parties, ensuring fair representation to both the buyer and seller. They are required to abide by the terms and conditions stipulated by the purchase agreement, and they must also follow the state laws governing escrow accounts. Your escrow holder should be a trustworthy professional who knows what they are doing.
- Upon completion of the transaction, the escrow holder closes the account. This can only happen once the title has been legally transferred from the seller to the buyer, and all other conditions have been met. You need a meticulous and organized lawyer to handle all the paperwork and transfers during this phase.
Contact Florida Home Title Company for more information about escrow accounts.