Real Estate FAQ: What is Escrow?
A commonly asked question when buying a house for the first time is what is escrow? The actual definition for escrow is “a bond, deed, or other document kept in the custody of a third party, taking effect only when a specified condition has been fulfilled.” Essentially, escrow is a company hired to act as a third party who handles the funds that are transferred from the buyer to the seller and coordinate the closing process of a house. They keep everyone on track for closing and handle all of the funds.
The escrow company records the new deed with the title company once it is closed. The escrow agent can be an escrow company, an attorney, a trust company or a title company. The escrow officer or closing agent will be given instructions on how to handle each transaction.
There is an escrow fee that is usually paid by both the seller and the buyer. If the seller is paying the buyers closing costs then the seller will be paying all of the escrow fees. A buyer who is using a VA loan is not allowed to pay any of the escrow fee’s and an FHA loan is allowed to pay up to half of the escrow fees.
Learn what the Escrow Process is here: What is the escrow process?
