Definition
Escrow
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An escrow is an agreement between two or more parties whereby a third party would hold funds belonging to them and release them according to the terms of the escrow agreement, which is often the occurrence of certain specific events.
Escrow services play a big role in the efficient processing of real estate transactions.
This is firstly because a lot of money is involved. Secondly, it takes time for closing to run it’s course. Thirdly, it ensures a seller that sales proceeds would be collected once the title transfer is completed.
In a property transaction whereby ownership is transferred from a seller to buyer, solicitors would be involved in providing conveyancing services for the proper transfer of title from one party to another.
The buyer would make payments, which would be kept in an escrow account or special conveyancing account.
With the proof of funds verified, the seller would then proceed with endorsing the title transfer. Once transfer is done, the funds contained in the escrow account would be released to the respective parties as stated in the escrow agreement.
As can be observed, escrow adds a layer of protection to both buyer and seller of real estate.
The buyer can proof that he has the funds available to complete the purchase while ensuring the there is no way the seller can take the money and run without doing a proper transfer of title.
The seller on the other hand can be sure that the sales proceeds are proper and would be released upon transferring the property’s ownership.
The lawyer gets to charge a fee for a service that is well appreciated by both parties.
All sides of the transaction wins.
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