What is Escrow?
Get to Know Escrow: How Escrow Can Help You with Your Real Estate (and Other) Transactions
by Karl Arrieta on July 8, 2011
If you are one of those individuals who have never been involved in a real estate transaction before, then chances are you don’t know what escrow is. Escrow acts as a neutral third party that will hold funds on behalf of a buyer who wants to purchase goods, services or property from a seller.
Here are some other important things to know:
- The goal of escrow is to protect both sides of the transaction to ensure that the seller will receive the buyer’s funds once the goods, services or property has been delivered to the buyer.
- This guarantee will help ensure that the buyer will receive the goods, services or property from the seller before the buyer’s funds are released.
- “If you can buy or sell something, then you can ‘escrow’ it!” Escrow can involve all kinds of goods and services like automobiles, artist performances, coffee beans and even fertility clinic services.
A couple of years ago, I had a friend who was purchasing his first condo and was wondering what he needed an escrow or “middle man” for. Since I was already working in escrow at the time, I simply provided him with the following supposition: “Ok, so you are about to transfer thousands and thousands of dollars of your hard earned money for the purchase of this unit. After transferring all these funds, what if later on you find out that title was not transferred to you? What if you find out that something is wrong with the property? Let’s say title is transferred correctly to you and what if you find out that the seller has all kinds of debts attached to this property and now you have to be responsible for those debts since you legally own the property? Well, these are exactly the kinds of situations that escrow will protect you from!”
You could technically do all of these tasks yourself, just like you could technically purchase or sell a house without a real estate agent, but would you really want to? Would you be prepared for all the work that this would entail? Wouldn’t it be better to hire a professional and experienced individual to assist you in one of the biggest transactions of your lifetime? Wouldn’t you have peace of mind knowing that no funds will be disbursed without the written instructions of both parties? I think if you truthfully answer these questions, you will find that you will want an experienced and professional service to protect everyone’s interests and a licensed escrow company will do just that.
