The terminology involved with the home purchase process can seem confusing. “Escrow” is often one of those perplexing terms home buyers face when it comes to contracts and the basics of purchasing a new home. The good news is that escrow is actually quite a simple step. Let’s dive into what the term “escrow” and the escrow process means so you can come away understanding real estate escrow fully when you are buying your new home. And, if you think of it in terms of “in escrow” that might help explain it a little easier, too. So, what is real estate escrow?
What is Real Estate Escrow?
How Does Escrow Work When Buying A House
Simply put, real estate escrow when buying a home, is a place where money is stored with a neutral party during the home purchase process. The group that often holds the escrow – or the money in escrow – is the real estate firm with the listing. In certain cases, smaller firms will let the title companies hold escrow funds, primarily because they do not have escrow accounts. The title company will need to be chosen before putting in your offer. And often, your real estate agent will be able to give you the information for a great title company they enjoy working with that does good work for their clients.
The money we are talking about putting into escrow is your earnest money deposit. The earnest money will be kept until the home sale goes through. At that time, the earnest money will be transferred with the remaining balance on the price of the property from your loan officer to the sellers.
Do You Get Escrow Money Back At Closing?
Working with escrow is a common way to buy real estate. The use of a deposit of earnest money into escrow allows the sellers to temporarily lock in the idea that you want to buy the home. Once the escrow money is received, new offers for the home will be paused giving you time to review and inspect the property and your home loan options. At times when the real estate market is extremely active and there is a low inventory of homes for sale, it’s common to have back up offers come in on a property.
After putting down a deposit into escrow, the process of reviewing and inspecting the home does come with a deadline. It varies between home buying and selling deals, so it’s important to review these deadlines with your real estate agent.
After inspecting the home and deciding you like it and would like to buy it, your earnest money in escrow will continue to be held until closing. At which time, this money will be applied to the purchase of the home and you will owe the remaining balance. Often this will be in the form of a loan from your mortgage broker or bank.
Escrow During the Home Buying Process
Regarding escrow deadlines, there are timetables to follow for the decline of a home purchase. If you decide not to purchase the home after you have inspected it, you’ll need to decline the purchase of the home before the set deadlines. Going past these deadlines might leave you having to forfeit your earnest money deposit or pay a fee to continue processing your return. Review this timeline and penalty information before signing your home buying contracts with your real estate agent.
The process of putting down the deposit into escrow is relatively simple, but again, there is a schedule to stick within that keeps the process moving forward. You can see why it’s important to have a professional and experienced real estate agent by your side. They are a great go-between with all the answers to guide one of your most valuable purchases – your new home. Make sure to discuss any other questions about real estate escrow you might have before you move forward with your deposit and sign your real estate contracts.
Your Knowledgeable Memphis Area Real Estate Agent
When it’s time to sell your existing home or buy a great new place, turn to a highly-regarded and well-informed local real estate agent. You want a real estate agent that will guide you during both your home selling and buying journeys. You want someone who you can trust to give you the best advice and know-how for your new home purchase or sale. Check out my other great articles to help you through your home selling and buying experience here in Memphis.
And, take a minute to learn more about me and how I can guide you with your house sale, new home purchase, or buying a great parcel of land. With over 15 years of top-notch service for my clients, I want to help you with your home selling or buying process as well. As a top 1%, certified, and licensed real estate agent in the Memphis Tennessee area, showing you the best properties for you and your family is my goal! Contact me at (901) 828-8919 or drop me a quick note at firstname.lastname@example.org and we can speak in person about your plans and options. I look forward to speaking with you today! Ask me about seeing homes for sale by video or virtual tour and find the best place for you!
Angie Kelley, Crye-Leike Realtors
(901) 828-8919 or (901) 756-8900