People, when buying a home in South Bay, get puzzled when they hear about security deposits. This is partly because security deposits are used for at least two distinct elements in a real estate transaction.
Simply put, an escrow account means that a neutral party will hold the funds and will only distribute it when both parties involved in the transaction meet certain conditions. This inclusion of a third party is only to make sure that the transaction is smooth and fair as the person with the money will have nothing to lose in the transaction.
However, it leads to more complexity when it comes to buying or selling real estate in South Bay. In this post, we will break down for you everything you need to know about escrows whether you are a buyer or a homeowner in South Bay.
Buyers demand security guarantees when making a transaction or sale, don’t you think? In a world increasingly anonymous and integrated into the Internet, it is no longer valid to “trust the other party.”
What is escrow?
The escrow is an Anglo-Saxon term, better known in the United States as an escrow deposit.
It is a type of contract between two parties in which a good is deposited (money generally), with the peculiarity that the third party in good faith will safeguard the deposited good and will watch over the fulfillment of the contract. In all honesty, an escrow is nothing more than this definition.
How does escrow work?
Its main usefulness is focused on the sale, in which a buyer and a seller agree to transact a good or service in exchange for money.
The amount of the transaction is delivered to the escrow agent, who will keep an escrow account until the buyer receives the product, or in this case, the house or property. Only when this occurs, the escrow agent will pay the amount of the transaction to the seller.
What advantages does the escrow have?
The escrow solves a security problem. Often two parties agree to transact a good or service but, due to the lack of trust (especially if the parties do not know each other), both will want to protect their interests and avoid any type of scam.
The buying party will want to receive the ownership of the real estate in South Bay before making the payment, while the selling party will require payment in advance.
This is where the escrow contract comes into play. The buyer is assured that, if he does not receive the property or real estate, he will recover his money while the seller has the guarantee that the payment has already been made before delivering the ownership of the property and that this is guarded by the so-called escrow agent.
The security problem is thus resolved, allowing buyers and sellers to keep their interests safe.
Many sellers have adopted the escrow contract to eliminate the distrust that the home buyers may have and thus increase their chances of selling their real estate in South Bay.