When two parties are in the middle of a transaction, it can benefit them to have a third party hold the assets. This legal agreement is called escrow. It helps the buyer because he or she can perform due diligence before the deal is sealed, and it helps the seller because it shows that the buyer is earnest about following through.

When Escrow is Used

Escrow is used in many different types of transactions. Because the sale of a house often comes with many contingency clauses such as financing, inspections, and closing costs, homebuyers often use business escrow services California. Escrow is also used in digital transactions as a way of protecting buyers and sellers from online fraud. Stock exchanges often utilize escrow as well, whereas the shareholder can’t sell the stock until an escrow period passes.

How Escrow Payments Work

Some homebuyers use escrow simply because it can make payments easier to handle. Insurance premiums and property taxes are fragmented when an escrow account is used. Payments that would normally be in large checks can be handled in smaller bits month by month. On top of that, the lender doesn’t have to worry about these payments, as they are the third party’s responsibility.

How Long Escrow Payments Last

Mortgage escrow payments can last as long as the loan is in place. The process usually takes at least thirty days. Oftentimes the lender will request for the escrow to end when the loan-to-value lowers to a certain percentage, or when enough mortgage payments have been made in a timely manner.

Even when escrow isn’t required, it provides protection and bolsters confidence for everyone involved in a transaction. Whether the middleman is a title company, attorney, or escrow agent, it helps to have someone else take care of the assets before a deal is finalized.

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