Escrow Service

If you're looking to purchase a house or another valuable property such as art, jewelry, land or software source code, you will need to look into some type of Escrow Service. Enlisting Escrow Services does not have to be confusing or difficult, and it can often make the lives of both a buyer and a seller much easier during the transaction.

What is Escrow?

The simplest way to think of an Escrow Service or agent is to compare their function to that of a trusted middle man. Escrow is a legal arrangement where one party transfers something, usually money for a purchase, to an agent while a contract is being executed. The agent or agency holds the money until all of the conditions of the contract are met. Once these contingencies or conditions are met satisfactorily, the escrow agent will deliver the money to the proper recipient.

Why Escrow Services?

Many times, buyers and sellers are complete strangers. When these two parties don't know each other, they may want to turn to a third party to mediate their transaction to prevent any kind of fraud from taking place. The Escrow Service is a third-party they can trust to make sure their transaction is simple and secure. The agent or service also acts as a convenient point of contact to manage and answer questions about the transaction or the processes and stages of the transaction. As a result, the Escrow Service gives the buyer and the seller confidence that their transaction will be carried out fairly and successfully.

Mortgage Escrow

The most common use for an Escrow Service is to maintain a mortgage. When a mortgage is obtained, an escrow account is set up to manage money for property taxes, fire and hazard insurance premiums, mortgage insurance payments and other related escrow items.

With an escrow account, a homeowner is relieved of keeping track of these payments. The escrow account ensures there is enough money for payments and payments are made on time without a lapse in insurance coverage or delinquent taxes. They also keep the homeowner from having to come up with lump sums each time one of these payments is due. Having an Escrow Service responsible for dealings with insurance companies and tax agencies can be very helpful to the average homeowner.

Finding an Escrow Service

Depending on the conditions of the transaction, you may want to use an Escrow Service for any purchase over $500. These services can be extremely useful when purchasing over the internet or similar transactions where the buyer and seller are separated by distance and know little about each other.

An Escrow Service should be licensed and regulated. The buyer and seller should determine beforehand the conditions that need to be met during the transaction before enlisting the help of an Escrow Service. It should also be decided who will pay the fees for the Escrow Service.

Fees vary depending on the service chosen and type of transaction executed. Either the buyer, the seller or both can pay the escrow fees. Fees are usually calculated by factoring in the price of the purchase and the chosen level of service or mediation.