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Why escrow accounts are helpful

On Behalf of | Sep 17, 2019 | Residential Real Estate

Individuals who are seeking to buy a home in Delaware may need to put money in escrow before their transactions close. Putting money into escrow can provide incentive for both a buyer and seller to act in good faith until a home sale closes. A lender could also take a portion of a down payment or mortgage payment and put it into an escrow account. In such a scenario, the money would likely be used to pay property taxes and homeowners insurance.

In some cases, landlords and renters will use escrow accounts to transact business. For instance, if a landlord refuses to make a necessary repair, a tenant could decide not to make a rent payment directly to that person or entity. However, the tenant would still be required to make the payment as called for in the rental agreement. The payment itself would go into an escrow account until the issue between the property owner and the renter can be sorted out.

It is important to know that any money or assets put into an escrow account is typically put there for safekeeping. If a home sale falls through, a buyer will likely get back any money that was put into the account. The same could be true if a landlord reneges on his or her obligations.

The creation of an escrow account could be one of the clauses inserted into a residential real estate purchase contract. An attorney may review this and other contract terms with a buyer. Legal counsel may also review a mortgage contract with a buyer to ensure that he or she understands the terms of the deal. A lawyer may also perform title searches on behalf of a buyer.