Introduction to Escrow
Escrow is a legal concept describing an agreement where money or assets are held by a third party until obligations between two parties are fulfilled. The assets are managed by an escrow agent who releases them when conditions are met. Escrow facilitates transactions by ensuring both parties meet requirements first.
Escrow Process Overview
- Escrow length varies. A typical escrow takes 30-60 days but could be shorter or longer depending on the agreement.
- After purchasing a home, lenders may open an escrow account to pay property taxes and insurance.
- To ensure enough funds, lenders require around two months of extra payments held in the account.
Benefits of Escrow
- Escrow companies generate revenue through fees charged for their services.
- Different types of transactions utilize escrow such as deposits, mortgage loans, and large purchases.
- The biggest benefit of escrow is protection for both parties during transactions.
- The neutral third party ensures contractual obligations are satisfied before releasing funds.