Venturing into real estate is more than just knowing about the property you’re buying or selling. There’s more to look into to ensure that the transaction is as smooth as possible. One thing most homebuyers overlook is escrow, which is a key element to every real estate transaction. For those who want to know more about an escrow agreement and how you can use it when buying a house, here are some things to consider.
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What is Escrow?
If you’re interested in real estate transactions, “escrow” is a term you’ve probably already heard. An escrow is an arrangement where you use a third party to protect yourself from the risks involved in such a big financial transaction. For instance, A and B want to enter into a real estate agreement, but A doesn’t trust her money to B because he’s a stranger. In fact, A is afraid that B may run away with her money without getting the property she wants to buy. That’s where C comes on. C (your escrow agent) is an impartial third party who handles the arrangement, ensuring that it’s fair.
What is an Escrow Agreement?
An escrow agreement is a legal document stating the terms and conditions of the real estate sale between the parties involved, including the escrow agent. In the previous example, A, B, and C’s arrangements are outlined in an escrow agreement, which is legally binding. So, what’s Included in an Escrow Agreement?
1. The Independent Third Party
An escrow agreement contains information about your escrow agent and the escrow company. This should include the escrow fees to make the sale transaction succeed. Before you sign the agreement, ensure that this section is clear. You need the exact details of the escrow since you are entrusting your money to this person or company.
2. The Funds Involved in Escrow
The escrow funds need to be included as well. The escrow agreement includes the amount of the funds, and the conditions for it to be released to the seller of the real estate property. The information in this section should be clear and easily understood by all the parties involved in the transaction.
3. The Conditions to be Fulfilled by All Parties
Other than the conditions for the funds to be released, an escrow agreement should also state other conditions to be fulfilled by all parties, such as the acceptable utilization of the money by the escrow agent, his or her duties and liabilities, the jurisdiction of the legal action, steps the seller and the buyer need to take, and so on.
Escrow Agreement for Your Transaction
If you need an experienced firm to conduct escrow agreements, contact us at Bay Area Escrow. We have extensive experience providing escrow arrangements to real estate buyers and sellers in the Bay Area. If you need a third party to mediate your property transactions, don’t hesitate to reach out to us at (925) 831-9099. We look forward to working with you.