Going through the escrow process can be a bit of an obstacle course: you pay to get in and then you have to jump through a ton of hoops before closing your home! A good real estate agent can help you avoid the pitfalls. In this article, we try to give you an overview of the escrow process and the costs involved.
What is an escrow account?
According to Investopedia, “Escrow is a legal concept that describes a financial instrument in which an asset or trust is held by a third party on behalf of two other parties who are in the process of entering into a transaction.”
This is about as clear as mud so let’s break it down! Basically, Escrow is the idea that a neutral third party should hold the funds in a real estate transaction while the details of that transaction are worked out. In Oregon, the third party in any real estate transaction will always be a licensed escrow agent. Most trust agencies also offer property insurance and can be referred to as trust or title companies.
Trust agents hold the serious money. The money in our area is typically 1% of the home purchase price and is due quickly after the home is outstanding (the seller accepts the buyer’s offer). The money is transferred to a special account called an escrow account that will last until the house is closed or the sale fails.
The term “escrow” comes from the fact that the buyer’s real money is in escrow while the buyer, seller and their respective brokers work through the home sale checklist (inspections, repairs, title searches, etc.) . Typically, the buyer has multiple options for getting their money back if they withdraw from the deal (multiple contingent liabilities are baked into standard local quote form templates).
Portland Escrow Cost
Home buyers start the escrow process by depositing serious money into the escrow account. This sum, also known as the serious deposit, varies with each Portland home sale, but is usually the same 1% of the total purchase price of the house. It is not in addition to the purchase price, but comes directly from the down payment, which is due at the end of the escrow process. In our region, that amount almost never exceeds $ 10,000, even with a $ 1 million plus home sale, because going above 10,000 means the amount in dispute will be higher than the Small Claims Court’s limit.
As soon as the seller accepts the offer and the money earned is in the escrow account, no further payments are due until the closing date or immediately before the closing. When closing, buyers are required to provide closing costs as well as the down payment, and their lender (if they get a loan) must submit their funds. “Closing Costs” is a collective term for all fees charged by the lender to finance the home and may include property and trustee costs. They can also include your first month of PMI and often prepay your property taxes. Please contact your real estate agent or lender for a full list of fees that may be included in closing costs. The bottom line is: The closing costs are usually an additional 2-5% of the total purchase price of the house, and contrary to the serious money and down payment, they do not go towards the cost of the house.
Finally yours deposit is also due at the time of conclusion. It can be anywhere from 3-20% of the total price of the house depending on the deal that you have negotiated with your lender.
Recommended Portland Escrow Company
We choose the Fidelity National Title of Portland! Their website has tons of additional helpful information about what an escrow account is and how to navigate as a home buyer or seller.
Nervous about the escrow account? When you have an experienced real estate agent by your side, everything will run smoothly! Contact our top 1% sellers and buyers today.
4th September 2020
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