November 8, 2019
You’ve undoubtedly heard the word “escrow,” but you may not know what it means. Escrow is a particular process in home buying. It begins once a seller accepts an offer from a buyer. The most well-known aspect of escrow is when a buyer deposits some of the upfront money in a third-party account, as a show of good-faith. When the escrow process is completed, the rest of the money is sent to the seller. But several other important things happen during escrow, including walk-throughs, appraisals, inspections, and financing. Let’s take a closer look.
Escrow Begins When The Seller Accepts The Buyer’s Offer
Once a seller has accepted the offer of a buyer, the next step is for the parties to go into the escrow process. After the price is agreed upon, the real estate agent will handle the escrow account. The earnest money is collected and deposited into this account. The third-party managers overseeing this account also hold onto things such as deeds, financial documents, and other real estate documents pertaining to the sale. Once the transaction is finalized and completed, the money and documents are released from escrow.
Appraisal, Inspections, And Financing Are Typically Done During The Escrow Process
During the escrow process, several important things need to happen. The bank will appraise the home to make sure that its value has been properly assessed. The buyer will finalize their financing to ensure that they can actually provide the seller with the funds to purchase the home. The buyer will also conduct inspections to ensure that the home doesn’t have any serious damage. The buyer may also conduct walk-throughs during this period as well.
Deals Can Fall Apart In Escrow
It is important to understand that just because a deal goes to escrow, that doesn’t mean that it is complete. Home sales fall apart in escrow all the time. Sometimes the buyer can’t properly finance the home. Sometimes a seller didn’t disclose property damage, and that turns up in the inspection process. Sometimes–though more rarely–a bank won’t agree to financing after their appraisal finds the home is significantly overvalued. Going to escrow doesn’t mean a deal is done, and both parties should understand that fact.
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