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Escrow is a legal arrangement where a neutral third party, the escrow agent, holds an asset during the period in which the transaction is being finalized by the other parties. In real estate transactions, the asset held is is usually cash deposited by one or more of the parties to the transaction, but can also include a deed or other legal instrument.

 

When a buyer makes an offer on real property and the seller accepts the offer, the buyer is expected to provide earnest money. Earnest money is just that - money to show the buyer is earnest about the offer. Generally the offer to purchase states the buyer's intent to purchase the property subject to certain conditions. These conditions usually include the buyer being able to obtain a mortgage to complete the purchase, the sale of other property by the buyer (such as sale of the buyer's principal residence in order to pay off an existing loan and obtain the money needed to complete this transaction). Conditions may also include the seller completing and paying for certain repairs or changes to the property. When the conditions of the offer have been met the escrow agent gives the cash deposit to the seller. If the conditions are not met, the cash deposit is given back to the buyer. In the event the conditions are met but the buyer backs out of the transaction, the cash deposit will be given by the escrow agent to the seller as compensation for pulling the property off the market in anticipation of the prospective buyer going ahead and completing the purchase. The escrow agent in this case acts as a neutral third party thereby avoiding possible lawsuits between the buyer and seller over who is to get the deposit if one party defaults.

 

Contact Prestige Title Agency today for all your escrow service needs.

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