Having an offer accepted for your dream home is exciting, but it’s only the beginning of the transaction. After signing the sales agreement, you’ll have to go through the escrow period, which can be an unfamiliar process for first-time homebuyers. Below is a quick guide to everything you need to know about escrow when buying a house.

What Is Escrow?

In simple terms, escrow is an asset held by a third party until everyone fulfills their contractual obligations. This instrument protects the interests of the buyer, seller, and lender and helps prevent disputes.

If you’re buying a house, you’ll usually be required to put down earnest money and the down payment into an escrow account. If the sale goes through, these funds will go toward the purchase price of the house. However, if the seller backs out or fails to uphold their end of the contract, the agent holding the escrow account will return the money to you.

Escrow also protects sellers from buyers deciding against purchasing a home at the last minute. If the buyers back out of the sales agreement, the earnest money in escrow will usually go to the seller. This gives buyers a financial incentive to follow through on their contractual obligations.

What Happens During the Escrow Period?

Buying a house is a complex process, and several steps occur during the escrow period alone. The buyer will need to commission an inspection, secure a mortgage, and conduct a thorough title search. Meanwhile, the seller will need to take care of any repairs described in the contract.

Most sales agreements stipulate that buyers can back out without losing their earnest money if the inspection uncovers serious defects. Likewise, the sellers may cancel the contract without a penalty if the buyers are unable to secure a mortgage. Having an impartial escrow agency hold onto the money ensures it will go to the correct party without legal disputes that could become long, drawn-out lawsuits.

If you’re hoping to buy a house anywhere in the Chattanooga, TN, area, trust The Erickson Team - United Real Estate Experts to help you find the home of your dreams. Their team brings years of experience, which they’ll use to find the perfect home for your family and guide you through every step of the process. Follow their Facebook for updates and tips, visit their website to browse properties for sale, or call (423) 710-6187 to speak with an agent today.

Office:
6720 Heritage Business Court, Suite 602, Chattanooga, TN, 37421
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