Part of the reason people retain legal counsel during the home-buying process is that it can be a very complicated process. Buying or selling a home occurs in stages, and each one is very manageable. It takes a team of people to navigate through the process. That is why you must choose these people wisely—from your realtor to your lender and your Real Estate Attorney.
Next, we want to look at one particular stage of the process: after the seller accepts the offer. There will be a relatively long period, perhaps a few months, that passes in between the seller accepting the offer and the buyer owning the home. Though several key things happen during this period, one critical piece is putting money into escrow.
Because of the duration of the transaction, it is unrealistic to expect that no money should be exchanged or even put forth during this time. Think of escrow as a way to split the difference. The seller isn’t receiving money, but you aren’t holding onto it either.
Your offer is just a formal document. If the seller accepts it, some of the components of that offer come into play. These include earnest money and your down payment. That money goes into an escrow account. This is an account managed by an outside party that doesn’t represent the buyer or the seller. Their job is to hold onto and safeguard the money that goes into it. Ultimately, if the real estate deal is successful, the seller will receive the funds in the escrow account, and the buyer will receive the property.
Why Is There a Need For an Escrow Account?
If this is your first time buying a house, you may not fully understand that there is a significant difference between pre-approval and final approval. Pre-approval can be done in a matter of minutes. You report, in good faith, how much money you have, make, and wish to borrow.
Your lender will approve or deny your request based on several factors, namely your debt to income ratio. To secure financing from your lender, you must provide all required documentation to verify what you declared in your pre-approval application. An escrow account allows a portion of your payment to be transferred while the seller waits for you to receive final approval from the lender.
The Matus Law Group
At the Matus Law Group, we aim to provide you with professional legal services while keeping you informed throughout the home-buying process. Buying or selling a home is a momentous occasion in your life. We want to enjoy this time, so allow us to protect your interests. Contact us to schedule a consultation!