What is an escrow? How is it important while purchasing a property?

What do you understand by an escrow?

An escrow can be explained as a deposit of funds made by the buyer for the purchase of a specific property and documents and instruments deposited by the seller of the property in an escrow. These deposits are normally deposited with a neutral escrow company. The company is to make sure that each instruction co-signed by the parties is brought to conclusion.

What are the advantages of having an escrow?

Having an escrow has diverse advantages which are;

• The too parties can be confident that their deposits are secured with the escrow company.
• Having an escrow ensures that each party sees to the completion of the tasks,
• It gives confident that no party can dupe another.
• It also ensures that the title deeds are properly investigated to ensure that it is clear of any encumbrances.

Who chooses an escrow agent?

This is done on the agreement of the parties involved in the transaction, that is, the buyer and the seller, or each member of the party with the concession of the other to do so. But most times the seller chooses the escrow company.

How does escrow of closing work?

If the contract of sale or estate purchase agreement is finalized and an escrow company is selected, the selected company is given the contract along with instructions to see to. An escrow account is created on behalf of the parties. The seller is expected to have the documents and instrument of the house in escrow. The buyer is expected to deliver the funds for the purchase of the house in escrow. And the seller is to deposit the document in relation to the house. The escrow company will then put all efforts to ensure that the title deed is cleared of all encumbrances. This is to ensure safety on behalf of the buyer as he buys and moves into the property. In the escrow instruction certain contingencies are included, flood insurance, financing, repairs, home inspections, date of closing, date to exit the property if presently occupied, and other tasks which the escrow company ensures done. He also ensures a payoff amount is paid on any existing loan.

Cancellation of an escrow:

If things are not moving so well, or a party suspects a foul play, or one contingency or the other cannot be met and a party feels he wants to cancel the escrow. To do this, their must be mutual agreement for the cancellation signed by the parties. A cancellation fee would be paid this is a professional fee charged for the expenses done by the escrow company. This fee may vary. However, an escrow cancellation may involve a lawsuit, with the court determining which party is entitled to the funds or the documents.