What Is An Escrow Account ?
An escrow account is maintained by an escrow company that is looked upon as neutral third party to ensure that the seller and buyer of the property adhere to the terms and conditions stipulated in the purchase agreement. Usually, the money that is paid as the down payment and as earnest money is held in an escrow account until the buyer pays the entire purchase price of the property, insurance or any other payment. In addition, all the important documents related to the property are maintained by the escrow company.
An escrow account is a safe way to go about when purchasing real estate. It helps to reduce the chances of a scam and does away with anything unscrupulous related to the real estate transaction.
Usually, during the later stages of the real estate transaction, the buyer opens an escrow account. Once the purchase price is paid to the buyer, he has the option of closing the account. A person from the escrow company known as the escrow officer or agent is the one who mediates between the buyer and seller while the purchase process is going on. If for any reason the buyer backs out and no longer wants to purchase the property, it is the responsibility of the escrow officer to check the purchase agreement and all other relevant documents to see why the buyer is backing off from the deal. If the officer does not find a valid reason for the buyer to back out, then the earnest money and the down payment made for the property is given to the seller. But, the officer finds a valid reason, the earnest money and the down payment that is being held in the escrow account is returned to the buyer.
An escrow account does not necessarily have to be closed after the seller receives his or her payment for the property. The account can be kept opened after the lender and the buyer agree on it and it is in this account that the monthly mortgage payments have to be deposited by the buyer. Thereafter, the escrow officer ensures that the mortgage payment reaches the lender and also the buyer is adhering to the terms and conditions agreed upon at the time of closing the mortgage.
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