Broadly speaking, escrow is a deed or a contract that both the buying and selling parties enter into when a property is changing hands, and it stipulates the instructions that have been agreed upon on both sides of the table, including the agreed upon price of the property. Typically, the funds and instruments are given to a specialized agent, which is a neutral third party. The process entails getting final approval of the buyer from the lender or investor, constructing the mortgage, the buyer/seller contract, the financing agreements, and a breakdown of which party is responsible for each cost. This includes taxes, commissions, penalties and credits. When the neutral agent takes responsibility of the assets and follows through with the specified instructions, a “perfect” or “complete” escrow has been executed, and can “close”.
As A Buyer
Being on the buyer side of the process means assuming some potential risks, but can often be mitigated by negotiation or exercising rights available to the buying party. For example, if costs or fees are too high for a buyer, they have the ability to negotiate the listing agreement so the seller assumes more of said costs. A buyer can also be subject to last-minute closing costs if the property has undisclosed liens or judgments, unpaid taxes, or additional closing costs. In situations like these, being a buyer also has its benefits. A potential buyer has the power to back out of the whole purchase process if it does not seem legitimate or worthwhile. A buyer can also sometimes request the length of the home purchasing process and selecting a particular appraiser to value the property. If the home does not have buyers lined up who desire the property, the buyer has more power to negotiate, especially if the seller is in a position of necessity. Escrow can be an overwhelming process, but exercising caution and careful planning as the buyer can make it go more smoothly, and reduce the risk of making a bad purchase.