An escrow account is an important aspect of any Phoenix home sale. Not only does the seller benefit from an escrow account, but the buyer benefits, as well.
An escrow account is where a third party keeps items like the earnest money check and other documents until the sale is complete. This third party that handles the account is impartial to the situation and keeps both parties honest.
The third party that will home the escrow account can be different depending on where the sale is taking place. Some areas use an attorney while others prefer a title company. Either way, there will be a third party to help the process along and hold on to these important documents.
Items that are held in an escrow account need to be accounted for at all times. They are the money or documents that one party is providing to another in the event the sale is finalized. Without an escrow account, Phoenix buyers and sellers would need to exchange these items on good faith before the sale is complete and hope that neither party backs out of the deal.
As the sale proceeds, there are more and more documents provided to the escrow holder to keep within the escrow account. The escrow company will keep track of these documents to make sure the correct steps are being taken to finish a home sale. These steps will include the home inspection report, reports of any repairs, and documents outlining what must be done by the homeowner before the sale can be completed.
When all of these steps have been finalized and both parties have signed contingency release forms on each step, the sale can go through. Once the sale clears the money that the homeowner is owed will be provided to them. At this time the Phoenix buyer will officially receive the title to show that they now own the property.
The escrow account will not always have the same amount of money for each sale. This can vary depending on a few variables. In some instances, the buyer and seller may pay into the escrow. Other times might find only one party is paying. Usually, the fee will be up to two percent of the purchase price of the Phoenix property.
The money put into the escrow account is called earnest money or an escrow deposit. This money is only put into the account once a homeowner has accepted an offer from a buyer. The third party company holds onto this money, sometimes in the form of a check, until the end of the sale.
There are some people that call this deposit a good-faith deposit which is given to the Phoenix homeowner if the buyer does not follow through on their side of the contract.
Some Phoenix buyers do not have enough in their savings to cover the escrow deposit. In this instance, they may approach their lender that is providing the mortgage to see if they will also lend the escrow deposit.
When a lender chooses to loan on an escrow deposit they are likely to tack it on as a portion of the down payment paid for the property.
Many people involved in a Phoenix home sale find an escrow account a hassle. However, it is actually beneficial for all parties involved.
The buyer is protected because a third party is holding onto their money instead of the seller. Sometimes a seller will agree to fix something on the home and then fail to complete this before the closing date. The buyer’s money is safe in the escrow account until the seller complies.
Seller’s should be nervous about buyers who decide they do not want to purchase a house at the last minute. If a buyer backs out in the eleventh hour, they are breaking the contract. A broken contract gives the seller the opportunity to collect the earnest money deposit from the buyer even though they have to start the sale process again.
In many cases, the escrow account is not needed. The Phoenix seller and the buyer both follow through on their sides of the contract then the sale goes through perfectly. However, it is utilized when one of the parties break the contract and the other party must be compensated.