Escrow account

An escrow account is a temporary deposit held by a third party on behalf of two other parties, which is usually called an escrow agent. The temporary account operates until the process of a transaction is complete and all conditions between both parties are settled. The money or other assets are debited from this account when the predetermined legal obligations are fulfilled or the escrow agent receives the instructions to release the assets.

Escrow account is designed differently than regular accounts. The major difference between an escrow account and other types of deposit accounts is its temporary nature as was opened to support a certain transaction. In addition, its management by the third party is not common among other types of deposit accounts.

Functions of escrow accounts While an escrow account can hold securities, funds, cash, and other assets, this temporary deposit is more commonly used in real estate transactions. It is used when a buyer wants to do an inspection or other due diligence on the property while also wanting to make sure he or she has enough money to actually buy the property. This way, the seller can be sure that if the property matches the description, the buyer can buy it and the seller has not wasted their time and money. On the other hand, the buyer can be sure that his money is safe in the escrow account and will only be delivered to the seller if he is satisfied with the conditions of the house and is ready to buy.

Use of an escrow account An escrow account is also used between lenders and borrowers in mortgage transactions. Typically, lenders are those who regularly require deposits in an escrow account. Deposits are used to pay real estate taxes as well as insurance. Another reason to use an escrow account on property transactions is when a property is under construction when a buyer is already looking to reserve it for themselves. It is possible to deposit a certain amount into the escrow account to ensure that by the time a building is completed he or she will be first in line to receive the coveted property.

トップ   編集 凍結 差分 バックアップ 添付 複製 名前変更 リロード   新規 一覧 単語検索 最終更新   ヘルプ   最終更新のRSS
Last-modified: 2021-06-17 (木) 20:44:23 (164d)