What is escrow and what does the escrow company do?
What is escrow definition? It means placing something of value in the care of a neutral third party until specified conditions are met. This makes real estate transactions safer and smoother.
Buyers may put up an earnest money deposit. The escrow company holds it until the sale closes
If the seller has a mortgage on the property, the escrow company pays it off with the sale proceeds
Escrow officers also disburse other expenses like real estate commissions and lender fees
Escrow companies make everything safer. So you can get your earnest money deposit back if the sale doesn’t go through, as long as you abide by the contract.
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The concept of “escrow” is important in real estate. There can be up to three different kinds of escrow involved when you buy a home. It helps to understand these differences and how escrow works.
In many cases, an escrow officer or attorney holds the funds associated with a transaction until it closes or fails to close — for instance, you probably paid an earnest money deposit when your offer was accepted.
If you are using a mortgage to buy your home, your lender will issue instructions to the escrow officer. He or she will receive the balance of your deposit and closing costs, and your lender may wire the rest of your purchase price.
The escrow officer also pays out funds as instructed — paying pay off any mortgage balance owed by the sellers, commissions to the real estate agents, other providers like inspectors, and, finally, the sellers. Sometimes, money remains in escrow after closing for required repairs that take place later.