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 term agricultural property means a type of land that has been designed or is permitted to engage in agricultural activities. Also referred to as agricultural land, agricultural ...
property suitable for residential living, such as a house, duplex, apartment, mobile home, or condominium. ...
An enticingly attractive initial rate below the market offered in an adjustable rate mortgage. For example, the teaser rate may be offered at 2% below market. A borrower who cannot qualify ...
Adding a period of time onto another. An examples a mortgagor who successfully restructures his loan by tacking another five years onto the term. ...
The rate, usually expressed annually, charged on money borrowed or lent. The interest rate may be variable or fixed. The higher the risk, the higher the interest rate. Mortgage interest ...
Performance of a complete inventory of real property within a jurisdiction. A cadastral program produces the cadastral map. ...
One of the parties is unable to satisfy the conditions of the purchase and sale contract. ...
Unsecured long-term debt. There is no collateral or lien on the property. A debenture can only be issued by a financially sound borrower with an excellent credit rating because no ...
Any of a number of types of covenants agreeing to do or not to do something that is attached to the title and is passed form one owner to the next. See also covenant running with the land. ...
Have a question or comment?
We're here to help.