Buying and selling real estate comes with an interesting group of phrases and words, doesn’t it? If this is your first time down the trail of real estate deals, you may feel as if certain words go right over your head as you’re led through the process. Some phrases like down payment and earnest money aren’t too difficult to understand, but what about escrow?
What is escrow, and what is your responsibility to it? Although real estate agents such as Kim Clark of Kosciusko County, Indiana are phenomenal at walking you through that process, you may still need a refresher course on why escrow matters to you even after the closing is finished.
What Is Escrow?
Escrow is, in effect, a third party set in place in order to secure each party’s financial investment throughout the sale. This third party, the escrow provider, is an unbiased agency that handles the money and the legal documentation exchanged between the buyer and seller.
The escrow agency also guarantees that all agreements of the contract are filled, such as the down payment on behalf of the buyer, or any past taxes are paid by the seller before the sale is final.
It’s common the first time you hear the word, “escrow” is when you pay the earnest money as proof that you are committed to seeing the sale of the home finalized – barring anything arises that would break the contract.
This money is either reimbursed to you, applied toward the overall home sale, or given to the seller if the buyer doesn’t meet all the financial stipulations of the contract. That is something discussed with you, the escrow company, and the realtors involved.
Your initial escrow account will close when the home sale is completed and the property switches owners. You are not done with escrow all together, however. Read on to learn what escrow means for you as a homeowner.
The Second Escrow
When your initial escrow account closes, it’s common for your loan officer to set up another escrow account in your name which will exist throughout the entire life of your loan. This is lumped in with your mortgage payment and is responsible for the financial side of your loan’s principal, interest, taxes, and insurance.
If your property taxes or home insurance premiums rise, your escrow fees may increase. This is something done in order to guarantee that there are enough funds to cover each one of the above areas listed. It’s never a bad idea to ask your lender about your home’s escrow account so those annual fees don’t take you off guard.
Despite the fact that your escrow account is between you and your loan or mortgage company, the most important best step is to find a reliable, attentive, knowledgeable realtor who can help you make the best connections to the most trustworthy escrow provider.
With over two decades worth in experience, Kim Clark of Kosciusko County, Indiana, is a fantastic realtor who can help you walk through the confusing, brand new responsibilities which come with homeownership such as escrow. Why not call her today?