Whether you’re a first-time homebuyer or an experienced homeowner who’s been both the buyer and the seller, escrow accounts are things you need to be familiar with.
Here are a few brief need-to-knows and reminders about escrow accounts to help you maneuver the home transaction process:
What is an escrow account?
An escrow account refers to an account, held by a neutral third-party, that ensures payments paid into the account are held securely, while payments being made from the account are being paid as agreed.
These accounts support both buyer and seller by ensuring both parties fulfill their end of the agreement and payments, documents and other important transaction facets are presented and distributed fairly.
You may also opt to use your escrow account for your monthly payments to your mortgage servicer.
Why do I need an escrow account?
Well, that depends. It’s a good idea to have an escrow account from a reputable escrow company. However, if you aren’t paying mortgage insurance, have stellar credit and meet any other criteria set forward by your lender and interested parties, you may not need one.
While that may appeal to some homeowners and buyers, having an escrow account is a great way to ensure all payments are being made appropriately and as an added security measure for both parties. If your credit is low, lender requirements need to be met with more cushion or your lender simply requires an escrow account, you will need one for your real estate transaction.
Are there any risks with an escrow account?
As with most financial transactions, there are minor risks to an escrow account. The most avoidable is mortgage escrow account fraud. While escrow companies take precautions to ensure their clients aren’t involved in any type of fraud, some responsibility falls on the clients to know what signs to be wary of.
Some of the most common antics of fraudulent escrow practices lie with phishing scams, emails requesting personal information, requests for wire transfers and lack of identification from the escrow agent during communication. As a client, ensure your chosen escrow company properly identifies themselves during your communications.
You’ll also want to stay current with the best security practices when operating online. Some of those practices include: watching for scam email addresses, requiring identifying and traceable information when conducting transactions and business, staying current with your internet security and monitoring your account for any suspicious activity or discrepancies.
Escrow may seem to have many strange facets attached to it, but it is an excellent way to keep all parties informed and safe while conducting business. These accounts may also be used to conduct monthly payment transactions for property taxes, mortgage payments and other home-related expenses.
About the Author
Sheida Rezazadeh
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I find it very satisfying to be able to help my clients achieve their dreams through Real Estate. I have over 20 years experience in the Real Estate Industry. I began my career with my own investment in and management of multiple properties. I use my insight into the Real Estate industry and my vast negotiation skills to provide my clients with exceptional service. I am able to use first hand knowledge, acquired by my years of experience, to guide my clients through the process of buying or selling their properties. Whether it be Residential, Luxury, Multi-Unit, or Commercial Real Estate, I possess the Real Estate acumen to secure top dollar for my sellers and the best properties at the best possible price for my buyers! As a mother and wife I know the importance of creating the sanctuary of a home, as well as, the security that investing in Real Estate can bring to you and your family. I understand that buying or selling a home is more than just a transaction: it’s a life-changing experience. That’s why our team of highly-seasoned real estate professionals is dedicated to providing exceptional, personalized service for all of our clients. We take great pride in the relationships we build and always work relentlessly on the client’s behalf to help them achieve their real estate goals. Our team of experts represents the best and brightest in the industry, and we’re always striving to lead the field in research, innovation, and consumer education. Today’s buyers and sellers need a trusted resource that can guide them through the complex world of real estate. With our extensive knowledge and commitment to providing only the best and most timely information to our clients, we are your go-to source for real estate industry insight and advice.