What is Escrow?
If you’re a Veteran looking into buying a home, you’ve likely come across the term “escrow.” This is an important concept that ensures a fair transaction for buyers, sellers, and lenders. On this page, we’ll cover the basics of escrow, so you can take on the home buying process with confidence.
The Definition of Escrow
You’re not the only one who has wondered, “What is escrow?” after hearing the term used. The fundamentals of escrow are simple: in a transaction, an independent third party holds onto the funds until the buyer and seller’s promises are fulfilled. When it comes to a real estate sale, escrow is used to ensure that the buyer has the appropriate funds available and that the seller is properly transferring ownership of the property. You can learn more about escrow here.
With high-stakes transactions such as these, it’s critical that all parties involved act in good faith for the sale to be successful. As a buyer, you may be hesitant to hand over a large check to a seller whom you do not completely trust. Fortunately, a neutral third-party (escrow provider) can act as the middleman and make sure that the conditions of the sale are closely followed. Think of the escrow provider as a referee — they make sure the rules are adhered to on both sides.
Examples of Escrow
Although the concept of escrow may be new to you, chances are you’ve come across it in the world of online shopping. Sites such as eBay use escrow accounts for large transactions such as vehicles and other valuables to combat fraud and ensure a smooth sale. In cases like these, the seller will not ship the item until the escrow provider has received the funds from the buyer, and the escrow provider will not disburse the funds to the seller until the buyer has received the item.
Is Escrow Free?
Escrow providers offer a valuable service and deserve to be compensated for the work they do. Escrow costs can be calculated as a flat fee or as a percentage of the sale and can be covered by either the buyer or the seller. If either party violates the terms of the escrow, they may be responsible for additional fees.
If you know and trust a seller, looking them in the eye and shaking their hand may be enough to have confidence in the transaction. In the real world, having a mutual third party facilitate important transactions is critical, even amongst friends.
What’s Different About SoCal VA Loans?
At SoCal VA Homes we’ve developed The Dreamweaver Home Purchase Process so that Veterans like you can have the highest possible chance of real estate success. One of the steps we take is to put together offers that have attractive escrow terms. That means putting forth larger earnest money deposits and faster escrow periods than the typical VA loan. We believe Veterans deserve visibility!
At every step of the home buying or building process, our ironclad promise is to provide you with an honest, thorough, and effective service. If you have more questions about escrow accounts, we are here to help. Our team at SoCal VA Homes is committed to helping Veterans achieve homeownership. Contact us today at (949) 268-7742!