Introduction
Brad Roemer Real Estate knows that buying a house can be a little on the intimidating side. You have your agent, their agent, and the people that are selling their house. This can lead to feelings of anxiety. Don’t fret, we are going to help you get through the process. One term that you may hear tossed about like it is old hat is the word “escrow.” If you didn’t understand it before, you will completely understand it by the end of this article.
The Term
Escrow may sound like a really technical term, but it is not. You may also hear it referred to as “closing.” They both essentially mean the same thing. To make it sound less intimidating, we will tell you all it means is a third-party financial instrument. That means they will hold money for one person for the other. The reason for doing this is to make sure that you have the funds to afford the house. In the past, too many people were writing checks and later canceling them. Once the person moved in, it was hard to get them out. If you wanted to get the money you had to spend more money on a lawyer and pay court fees. To remedy this, the real estate industry made a holding program that would allow the money to change hands and no one was at risk.
Escrow Account
When you agree on a selling/buying price your agent will collect your money. Likely, you will not be paying in cash, so you will have to write them a check. The entirety of the funds must be collected, so you are going to probably need a loan. During this process, you, your agent, and the loaning bank will have access to the account to see how things are going. Before any money changes hands, the bank is going to have to do their due diligence and check to see if the house is worth the money, they are loaning you. This is also part of the escrow process. They have to know that the house is worth the money so in the event that you default on your repayment of the loan, they will have a way to get their money back.
Inspections
During the escrow, this is the time that you and the bank should both send inspectors to the house to make sure that everything is as the seller said it was. Many times. escrow will fall through when the seller is being dishonest with the state of the house. This can be a multitude of reasons but suffice it to say there was a problem with the integrity of the foundation or electricity.
Conclusion
Brad Roemer Real Estate hopes that this clears up a few things. We also hope that you do not worry too much about your new place. More often than not, escrow goes through quite smoothly. There are always horror stories, but know that they are almost always isolated incidents. It is in the same fashion that there are so many horror stories about divorce. Most end amicably and your escrow will as well.
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