Escrow Accounts When Buying A House
What is an escrow account? How does it work? How do you choose an escrow agent? What do you need to know about escrow accounts when buying or selling a home?
What is an escrow account?
An escrow account is basically an amount set aside to keep money that is owed by one party to another. Both parties determine when the money is officially transferred, normally on a set date or when a particular document is signed. Sometimes, an escrow account is used in such a way that a homeowner puts money into the account monthly and the escrow agent pays part of the money to the mortgage company in charge of the home loan. The rest of the money goes toward expenses such as home insurances. Escrow accounts are also used by a buyer to keep money that will be paid to a seller at closing.
How does it work?
It is similar to a bank account and is opened by the escrow agent. The buyer furnishes him with all the information necessary to complete the deal. The agent is involved in every step of the process. He receives copies of all the documents associated with the sale so he can make sure all the correct documents are completed. The escrow agent also releases the funds when the transaction is complete.
Who chooses the escrow agent?
The escrow agent can be anyone who is an impartial third party and usually works for the title company involved. Laws about choosing an escrow agent are different from state to state. Sometimes the buyer decides and sometimes it’s the seller who chooses whom it will be. This decision should be made early in the buying process as the money should be put up immediately.
How do you choose an escrow agent?
If it’s your choice as to whom will act as the escrow agent, you can basically choose whomever you want. However, the agent should be someone reliable enough to be in charge of the money in the escrow account.