For
first time homebuyers, the term escrow is often confusing. It is a whole chain
of events taking place after formal signing of sales contract between you and
the seller. Dean Graziosi defines escrow as a process in which something
valuable is kept in the custody of a person, lawyer or agent e.g. a third party
holds money or property papers. The money is used at some other time, during
completion of the process.
According
to Dean Graziosi, a buyer is exposed to word escrow several times during a real estate deal. Escrow lender accounts, Earnest
Money Deposits, Escrow agents etc. are just a few of the examples. Dean
Graziosi is an expert realtor. He is famous among US citizens because of many
reasons. He runs a successful infomercial series, the series is running for
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He has
also written books on real estate and auto business. His books are declared bestsellers
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He is a successful entrepreneur and a millionaire. This rich and
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Escrow Agent:
Escrow
process starts when transaction of property starts. Word escrow agent is used to describe your title company, attorney
general or any other person. This person is hired to keep your money until
final formalities of closing of the property are completed. Your escrow agent
will deal with all documents and money or precious commodities kept as a
guarantee.
Earnest Money Deposits:
You come
in to contact with Earnest Money Deposits when you decide to buy the property
for the first time. At the time, you will offer the money, held as an escrow by
your escrow agent. Here the process completes in following steps:
- The escrow agent will take the money.
- Money is kept in the trust account of the escrow agent.
- This money is known as escrow.
- The Escrow agent is responsible to protect the money.
- The escrow money is given back to the buyer on successful completion of transaction of the property.
- If the transaction of the property is failed due to any reason, the money will be distributed and dispersed in different ways.
Lender Escrow Accounts:
The term
escrow is also used when your lender sets up different accounts. With the help
of these accounts, your lender will pay insurance and taxes of your property at
the time when they become due. Typically, your insurance and tax bills are
directly sent to your lender.
Both,
taxes and insurance bills are paid annually. But, most of the lenders require
you, the owner; to pay 1/12th amount each month. You will have to pay this
money (escrow) by depositing in the
accounts set up by your lender. While signing deal on the lending documents,
your lender will include clause on PITI. It stands for Principle, Interest, Taxes, and Insurance.
What Does RESPA Suggests for
Escrow:
- RESPA stands for Real Estate Settlement Procedures Act.
- It has set special laws for lenders. All lenders must have to follow escrow laws set up by RESPA.
- According to RESPA, buyer does not need to maintain escrow account with lender.
- RESPA laws regulate maximum amount of money required by lender (to be paid by the buyer every month in escrow).
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