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What is the purpose of an escrow?

I don't own a home but hope to this spring. I've heard people talk about escrow, but I have no idea what it is or why I need it. Can you help me?
Asked By Meredith K | Greenwich, CT | 568 views | Terms Definitions | 1 year ago
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Pro
91 Answers
Lisa and Greg Harris

eXp Realty, LLC

(42)

"Escrow" is to be in contract basically. It means that you are purchasing the home. In different states, it may be simply called "Under Contract" In most cases in mean that you have put earnest (deposit) money down to go under contract. If you are a first-time home buyer, I would HIGHER recommend connecting with a local REALTOR to help you navigate the process! Over 70 people will touch as typical real estate transactions and they are there to answer questions like this and so much more! And in most cases, the cost of their services comes from the proceeds of the sale and is already factored into the cost of the sale. This means you are not coming directly out of pocket to have representation in the buying process! You would not go to court without an attorney.... so do not go into a real estate transaction without representation!
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Semi-Pro
47 Answers
Glenda X Bozett

RELI

(2)

An escrow is a neutral third party that holds onto funds or documents during a real estate transaction.

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Semi-Pro
44 Answers
Gloria Mitchell

Wilkinson Triad Realty

(52)

An escrow is a system of holding funds in trust until the buyer and seller agree that the conditions of a transaction have been satisfied. Escrow services provide a third-party neutral and secure way of managing funds or other assets in the transfer of ownership from one party to another. It is often used in real estate transactions when a large sum of money and other important documents, such as titles or deeds, are at stake. Escrow helps to ensure that the parties do not walk away without fulfilling their obligations.
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Rising Star
13 Answers
Mike Smallegan

Keller Williams Grand Rapids

(779)

An escrow is a neutral third party that holds onto money and/or property during a real estate transaction, until all conditions of the sale have been met. The purpose of an escrow is to provide a secure and controlled environment for the exchange of funds and/or property, ensuring that all parties involved in the transaction are protected. In a real estate transaction, the buyer typically puts their down payment and other funds into escrow, while the seller places the title to the property into escrow. The escrow company holds onto these funds and the title until all conditions of the sale have been met, such as the completion of any necessary inspections, the resolution of any outstanding liens, and the receipt of any required approvals. Once all conditions have been met, the escrow company releases the funds to the seller and transfers the title to the buyer, completing the sale. The use of an escrow helps to ensure that the transaction is completed fairly and efficiently, protecting the interests of both the buyer and the seller. As a home buyer, you may be required to use an escrow company during the purchase process. Your real estate agent and/or lender can provide you with more information on the specific requirements and steps involved in using an escrow for your home purchase.
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Rising Star
11 Answers
Pauline Dent

Keller Williams Chantilly Ventures

Another real estate term with several meanings. Escrow is what some call the period of time you are in waiting to go from contract to keys in hand and owning the home. For others..escrow is to deposit sums of money into an account to be used for the purpose of buying a property. And then there are escrow deposits made to your lender account for the purposes of paying taxes, insurance etc. Regardless of the meanings, you need escrow...and your local real estate expert will help you understand the term and when to do what and how.
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Novice
4 Answers
Chris Hoffman

Lehigh Valley Just Listed, LLC

Escrow basically means to hold some thing until something occurs. In real estate, a buyer will make a deposit, typically referred to as the earnest money deposit. That deposit will be held in escrow until closing day. The deposit is held in an escrow account, which is a protected account that has certain rules as to win. Those funds can be accessed. Once a contract has been executed, and a buyer makes a deposit, the listing broker places that deposit into an escrow account. So in real estate that is referred to as opening escrow, we are in escrow, it just means that a deposit was made to hold the property while the buyer gets their mortgage and or does their due diligence, everything they need to do before the closing date.
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Novice
4 Answers
Raymond Cabral

MVP Realty Associates LLC

(23)

An escrow is a neutral third party that holds onto funds or documents during a real estate transaction. The purpose of escrow is to ensure that the terms of the agreement between the buyer and the seller are met before any funds or property are exchanged. The escrow holder is responsible for handling and disbursing funds and documents as directed by the terms of the agreement, and for ensuring that all conditions of the sale have been satisfied before closing the transaction. This provides a secure and orderly way to complete the transaction and helps to protect the interests of both parties.

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