Escrow account
If escrow is the legal “moment” where assets are held by a third party (an escrow agent) hired by both the buyer and the seller of goods like real estate and insurance until the transaction is completed; it is only natural for the escrow account to be the “place” where the monies of this transaction are held.
For instance: a home buyer and a home seller go into an agreement regarding the fair market value of the house. Home buyer and home seller open an escrow account where the first will deposit the earnest money to the latter and - at least metaphorically – for the latter to store the title of the house to the first because during escrow he is not allowed to touch the house title and sell it to anyone else. They open the escrow account because, if the home inspection unexpectedly shows something unwanted, the escrow agent will be able to return the money to the home buyer, while the home seller will have the security of knowing that the home buyer has the funds to “put his money where his mouth is”. Because the dispute over the findings of the home inspection would commonly go to a “my word against his” that would lead to court battles, and, most of the times, once it was settled, the losing-part would say “well, I don’t have the money anymore” or “Well, I already spent the money”, real estate agents decided to institute a way to secure the money of the transaction, and that was a third-party temporary account: the escrow account.
Once all due diligence regarding the home is done, the escrow agent transfers the funds to the home seller and the transfer of title is done.
Being a temporary account, it gets closed right after all contract conditions in connection with the transaction are met.
Real Estate Tips:
Use our Real Estate Glossary as a real estate knowledge escrow account! Search away until you can't take it anymore and you decide to find a real estate agent to transfer the title of responsible for the home buying/home selling process!
Popular Real Estate Terms
The most common definition of economies of scale refers to the decrease in production costs of a single item due to a business enterprise’s expansion. In short, mass production can ...
Also called a rollover mortgage. Provides a borrower with a fixed-rate mortgage that expires at a preestablished time, such as in four years. This permits the lender and borrower to ...
A business in which one or more person, with unlimited liability, called general partners, manage the partnership. There are also limited partners who contribute capital, but do not manage ...
One who agrees to pay the debts of another in the event that the debtor does not pay. The creditor can demand payment from the surety as soon as the debt becomes due. Although a surety ...
An agreement occurring from actions of those impacted, but not communicated in writing or orally. For example, it is presumed that a real estate agent will perform his or her obligations ...
Economic policies designed to reduce the fluctuation in the business cycle. An example is Federal reserve monetary policies. An attempt by an underwriter to prevent a market price of a ...
Individual making the payments in a mortgage or pledging a mortgage or property. ...
An adversary hearing allows both parties to an issue to present their views. A public procedure performed by an administrative or legislative body to investigate certain matters and ...
Process of conferring and consulting with clients concerning real estate investments and developmental projects. See also American Society of Real Estate Counselors (ASREC). ...
Have a question or comment?
We're here to help.