What is Real Estate Escrow?

If you are selling or buying a home for the first time, you may not fully understand escrow.

Escrow is a contractual arrangement in which a third party receives and disperses the money and documents on behalf of the transacting parties. When it comes to real estate, all funds and title searches go through a third party attorney or title company.

How real estate escrow works

When you are selling your home, you want some insurance from the buyer before you take your home off the market. This is why after an offer is made, the buyers will put a percentage of the offer into escrow as a deposit which goes towards the final purchase price.

After a contract is signed by both parties and escrow has been deposited by the buyers, the next step is the inspection period. In the inspection period, the buyer has the right to perform their due diligence and have the property fully inspected. Only during this time period is when the buyers have the chance to cancel the contract and get the escrow deposit back. Once the inspection period is concluded, the buyer risks losing the escrow if they cancel the contract.

It is not unheard of for companies with innovative business models to do it differently. For instance, Homeclarity allows sellers full access to escrow funds before closing. This gives the sellers capital which they can use for anything. A great opportunity for those looking for much-needed help to sell their home and do not have the financial ability to move before their home is sold.