Understanding Escrow in St. Louis Real Estate
When you’re buying or selling a home for the first time, you might be unfamiliar with the term “escrow.” This is a financial tool which allows St. Louis buyers and sellers to place important documents, agreements and check with an impartial third party until the agreement is finalized. This escrow tool will usually cost between 1 and 2 percent of the total cost or the property, and it is usually figured out at the closing costs.
Whether you’re a buyer or seller, here’s what to know about escrow in St. Louis.
What to know about escrow
When using escrow, it’s important to remember that the third party is there to make everyone’s life easier. It’s his or her task to watch over the closing procedures and make sure that everything goes according to plan. The idea is to stop any fund or property from changing hands before the conditions of the deal are set and met.
The third party person in charge of the escrow will also hold onto important documents until they are filed. For example, when you have a home inspection done, the completed form will be handed off to the escrow officers. If the homeowners agreed to do certain repairs around the property, they will turn in a receipt from the contractor. If the St. Louis home you’re buying had some serious issues, then this is a great way to protect yourself and make sure everything gets done. As paperwork is filed, the escrow officer keeps track of everything so you know exactly where you stand in the closing process.
As soon as every contingency is met and all the other tasks are done, the money for the home is then send to the seller. The title, once it’s been cleared, will go to the buyer, and the whole transaction will be complete.
What this means for sellers and buyers
This whole process of escrow may seem like an unnecessary added step, but the truth is, it can save you a lot of money and headache.
For example, if your home inspection found structural issues in the St. Louis home and the seller had to repair them, the escrow officer would monitor this contingency. Later on, if the seller does not fix the structural issues after he or she has agreed to do it, then the escrow offer can protect the money for the home and stop the buyer from claiming it until the conditions of the deal are met.
Buyers aren’t the only ones who can benefit from escrow; sellers can benefit as well. If a buyer backs out for no real reason, then the seller usually gets to keep any small deposits the buyers have given to escrow – usually about 1 to 2 percent of the home’s price. It isn’t much, but it’s a nice little prize for sellers to make up for the fact that they have to start the buying process again.
In short, escrow can protect both buyers and sellers during the buying process. It makes sure all the conditions of the deal are met and all the paperwork is in one place.