An escrow is a financial procedure whereby a third party holds funds or assets on behalf of two or more parties involved in a transaction until the realization of prearranged contractual obligations.
Although this kind of arrangement is highly beneficial, it’s subject to many questions and misconceptions from people who’re yet to understand how it works. If you happen to be one, you’re in great company. We will discuss ten misunderstood facts about escrow to help you know the best escrow company better.
Commonly Misunderstood Facts about Escrow
If you’re thinking about trying out trusted escrow services, here are some commonly misunderstood facts you need to know.
1. Popular in but Not Limited to Real Estate
Escrow services are mostly used in real estate to facilitate the purchase and sale of highly valued properties. Their popularity within this realm is because they offer the buyer enough time to conduct a property inspection, perform a title search, and read all disclosures while assuring the seller that the buyer has what it takes to close on the property.
However, this doesn’t mean they’re exclusive to real estate. You can use the best escrow services to facilitate transactions in law, banking, and even corporate transactions.
2. Escrow Agents are Just Agents
As noted, an escrow is a financial arrangement whereby a third party holds funds or an asset. In the case of the best escrow services, you’ll be assigned an agent who oversees the third party account.
However, note, just because the agent oversees the transaction doesn’t make them an attorney. This means an agent can’t be partial, they remain neutral throughout the process. However, they’ll ensure you stay updated on the process, for instance, the best escrow company agent will let you know when the seller accepts the offer and keep you posted.
3. You Can Shop Around for Escrow Services
When buying or selling a home or performing any other transaction via escrow, your lender or real estate agents might suggest an escrow company to you. Although there’s nothing wrong with this, always remember you don’t have to settle with their suggestion. You can shop around for the best escrow services suited to your needs.
4. Referral Discounts are Illegal but Referrals are Not
It’s okay for a real estate agent or lender to offer referrals to an escrow agent. However, it’s illegal for the agent to offer discounts to the mentioned parties for referring a client to them.
5. Title Insurance is Important but Not a Must
For most people, escrow comes in handy when they need to put a lot of money on the line but want the assurance that they’ll get a particular set of conditions met. In that light, if you’re buying a property and using the best escrow company, title insurance is essential.
However, it’s not a must, and it all comes down to your current situation. But, it is usually a good idea to have it.
6. Escrow isn’t Only Applicable to High-Value Transactions
While many escrow transactions are usually high value, that doesn’t mean the best escrow services are limited to this scope only. The point of an escrow is to ensure both parties involved in a transaction are satisfied. That said, the best escrow company wouldn’t limit its services to high-value transactions only.
7. Escrow is Not Time Consuming
Most people misunderstand escrow as a time-consuming process, but it’s not. The escrow company only holds the money until both parties meet the predetermined obligation.
In other words, money cannot be distributed until both parties meet their end of the bargain. If you do your part, and the other party does its part, this process will be fast and smooth-sailing.
8. Escrow Companies Don’t Take Your Money
There’s this notion going around that after a failed sale, escrow agents take your money. However, this is a highly misunderstood fact. After a failed transaction, agents from the best escrow company often file an interpleader.
This document lists everyone involved in the transaction and requests the court to decide how the money will be distributed. If not, the escrow will hold the funds indefinitely. However, this doesn’t make the money theirs. They’ll only be holding on to it until you and the other party reach an agreement.
9. Escrow Service Requirements Vary
Due to how they work, most people assume escrow companies are one-size-fits-all. While it’s true escrow companies offer similar services, laws regulating escrow companies vary from one state to another. In some states, only attorneys can run an escrow company, while in others, one only needs a license to get started.
10. Money in Escrow Pays Homeowners Insurance Not HOA Fees
The money in your escrow account covers homeowner’s insurance but not homeowner’s association fees. It also covers property taxes, but not interim tax bills or additional tax assessments.
Let the Experts Help
Escrow can be a confusing concept, especially if you’ve only considered it recently. Got more facts about the best escrow services you need addressed?
Contact our team today to find out more.