S
ummer is a hot time for real estate, and as a buyer or seller, you'll encounter industry terms that can be confusing. One of these terms is escrow, which often puzzles even savvy buyers. So, what is escrow, and why does it matter to you? Let's break it down.

    In real estate, escrow refers to a neutral third-party account that holds money and documents while a home sale is in progress. This safety net protects both the buyer and seller during the transaction. When a purchase offer is accepted, the buyer typically deposits earnest money (a small percentage of the home's price) into escrow to show they're serious.

    Escrow ensures that:

    * The buyer doesn't lose money if the seller backs out unfairly.

    * The seller doesn't sign over the deed until the buyer's financing comes through.

    * Everyone holds up their end of the bargain, including inspections, repairs, final walk-throughs, and closing paperwork.

    The escrow period usually lasts 30 to 60 days and involves several tasks:

    * Appraisal and inspections are scheduled.

    * The buyer's mortgage gets finalized.

    * Title checks are completed to ensure there are no liens or claims on the property.

    * Any negotiated repairs are made.

    * The buyer transfers the rest of the down payment into escrow.

    * Both parties review and sign final documents.

    Once everything is in place, the escrow company releases the funds and officially transfers ownership. After closing, you might hear about an "escrow account" for your mortgage, where your lender holds money for property taxes and homeowners insurance.

    Common questions about escrow include:

    * What happens if the deal falls through? If the buyer backs out for a reason allowed in the contract, they usually get their earnest money back. If not, the seller may keep it.

    * Who chooses the escrow company? It's often negotiated between buyer and seller or recommended by the listing agent.

    * When will I know the amount of funds needed to close escrow? Once your loan documents are received and your escrow instructions are prepared, the title company will notify you of the exact amount required.

    Escrow may seem complex, but it's really about making the transaction fair and secure. Knowing how escrow works will help you move through the process with more confidence – and fewer surprises.