When you’re buying or selling a property, there’s a period of time called “escrow". In residential real estate, escrow is a service in which a neutral third party temporarily holds money or property until all agreed upon terms of a purchase agreement have been met by both buyer and seller. Involving a neutral third party can protect both the buyer and the seller throughout the process of transferring the property.
For example, though the purchase agreement has been accepted, a buyer may need to complete inspections or the seller may need to complete promised repairs or renovations on the property. At the same time, the seller may be wanting proof that the buyer financially qualifies, etc. These terms and conditions are usually outlined in the official purchase agreement.
While both parties are waiting for the documentation or results outlined in the contract, an escrow agent will manage the terms of the transaction and acts as the liaison between all parties involved in the transaction including buyer, seller, agents, and mortgage companies. The buyer deposits funds with the escrow company and those funds are held until both parties are satisfied with the conditions outlined in the purchase agreement. Once the buyer and seller have satisfied all conditions agreed upon, the deed is recorded transfering title to the buyer and the funds are released to the seller to complete the sale.
