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Commercial PropertyFinancial PlaningInvestingProperty InvestmentSavings

Why an Escrow Agreement Makes Sense In Real Estate Transactions?


First a definition: Escrow is the process of transferring deeds, bonds, or money using a neutral third party. An escrow agency is used to hold the buyer’s funds until the seller’s obligations have been met. Thus, the agency facilitate the escrow agreement.

Escrow is useful when negotiating large service contracts – for example, when a freelancer wants to receive payment before beginning a project, but the buyer is hesitant to provide payment before seeing the finished work. By using an escrow agency, the payment can be made (reassuring the seller) but not released until specific qualifications are met (reassuring the buyer). Escrow is also very useful for home purchases. How Escrow Works: Understanding the Escrow Agreement Process

The seller and buyer both open an account with an escrow agency. Payment is made to the escrow agency by the buyer, and the deed, title, or other property is handed over by the seller. The escrow agency acts as a neutral third party, holding both the property and the payment until the necessary qualifications are met. These qualifications are generally laid out in the contract, and may include a home inspection, property renovations, completion of a service, and so on.

When the qualifications are met, payment is released to the seller and the property is released to the buyer. If property is being purchased, the deed or title is then transferred to the buyer’s name.

In all cases, an escrow agency remains a neutral third party. They will not advise either party on the actions that they should take, provide tax advice, or provide legal advice. They simply hold property and payment while other things are negotiated. Knowing this is a crucial part of understanding the escrow process. What Can an Escrow Agency Do?

An escrow agency can draw up documents and help negotiate the contract between parties. An escrow agent can also facilitate the contract signing and other paperwork.
An escrow agency will confirm a clear title or deed. This means that they will check to make sure there are no liens, owed debts, or repossessions pending on the property.
An escrow agent will help transfer the title or deed into the new owner’s name and file any necessary paperwork to do so with the state, county, and city.
An escrow agency will receive funds from the buyer, hold them until the contract is fulfilled, and disperse them according to the contract.
An escrow agency will act as a liaison between the buyer and the seller.

If you are purchasing or selling a large service package, house, car, or other valuable property, it may be wise to consider using an escrow agency. The agency will be able to prevent problems and disputes before they start, by holding money and property and acting as a neutral third party.

By choosing to have an escrow agreement, you can protect your property. You can also save time that you would otherwise spend negotiating and money you might otherwise spend on legal fees. If you are making a large transaction, whether business or personal, escrow simply makes sense.

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