The Four “E’s” of Escrow

Unless you’re in banking or real estate, there’s a good chance the word “escrow” doesn’t have a whole lot of meaning for you. You know it’s this thing that happens when you…do I smell cookies?

Yes, that’s it. Escrow. That thing that lasts for about a month, but doesn’t capture your attention for very long. Until now. You see, I’m committed to helping you learn about your real estate transactions in a painless way so you can be fully informed at every step. That’s the key to making the best decisions for your unique situation.

So here are the four “E’s” of Escrow:

Efficient

Once the seller accepts your offer, the home goes into escrow until the sale is completed. It doesn’t actually go anywhere. The house stays right where it is – no heavy moving equipment required. What does go somewhere is your earnest money deposit, the seller’s deed, and other paperwork. It goes to a trusted, neutral party like a real estate title company, an attorney, or an escrow agent until the buyer is satisfied that they are getting what they paid for and the seller is satisfied that the buyer will pay the agreed-upon amount at the right time.

During the escrow period—typically 30 to 60 days—the lender processes the mortgage application, the title search takes place, and the buyer hires an inspector, purchases homeowners insurance, and gets packed and ready for moving day.

At closing, the loan and property transfer documents are signed. The paperwork gets completed and title gets recorded in the name of the buyer, money held in escrow is distributed to the seller and other parties involved in the sale, and the keys are dropped in the buyer’s hot little hands.

Evaluate

When you’re interested in a property, but need to check things out a little bit more, an earnest money deposit goes a long way towards buying you that time and showing the seller that you mean business. If you write a check payable directly to the seller, you’re taking a pretty big risk. A dishonest “seller” could cash the check immediately and disappear. Bye bye money. Bye bye purchase. What’s an interested buyer to do?

Escrow to the rescue!

Economic

Wire your funds directly, the preferred method, or write a check payable to a reliable escrow company and you’re guaranteed that your earnest money will either be applied to the purchase or refunded to you – less any funds you’ve forfeited to the seller if you fail to meet the agreed-upon requirements. Yes, the seller is at risk of a buyer who pretends to be interested but drags their feet too long, resulting in missed opportunities. The safety of escrow works both ways. That’s the beauty of an independent third party during time consuming and potentially costly negotiations.

In fact, escrow companies aren’t just for real estate, they’re also brilliant resources for expensive online purchases so no one gets taken by a scammer.

Easy

Hate paying property taxes and homeowners insurance premiums and keeping track of when they are due? No problem! Your mortgage servicer can set up an escrow account that helps track all of this (it’s also called an impound account). This way, every time you make a mortgage payment, you also chip in a little bit extra for your tax and insurance payments. Instead of a big lump sum every year, the mortgage servicer spreads the cost out so you pay about one-twelfth of your taxes and insurance bills every month. When the big bill hits, your mortgage servicer pays them from the escrow account so your payments are never late or forgotten. This is a very wise way to handle these annual expenses. 

And that’s Escrow in a nutshell – Efficient, Evaluate, Economic, and Easy!

Need a bit more help setting up an escrow account?

We recommend Harold Zapata of Equitable Escrow. Call, text, or email me for his contact information.

Remember, whatever your real estate needs, I’m here to help make the process fun and easy for you. I’m Stephen Burchard, The Desert Bowtie Realtor, taking the (k)nots out of real estate.