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The Importance of Escrow in Real Estate Transactions
Real estate transactions can be complex and involve a considerable amount of money. Whether you are a buyer or a seller, real estate is often your biggest investment. That is why it is important for both buyers and sellers to protect their interests and ensure that the transaction is completed smoothly. This is where escrow comes in.
What is Escrow?
Escrow is a financial arrangement where a third party holds and regulates the payment of funds required for both the buyer(s) and the seller(s) involved in a transaction. Escrow helps ensure that the transaction is completed smoothly and according to the terms agreed upon by both parties. Both the buyer and the seller provide the escrow agent with written instructions. When all conditions have been met, the escrow officer sends the closing papers to the county recording office, where the new deed is recorded. The escrow officer then releases funds to the seller.
How is Escrow Used in Real Estate Transactions?
In a real estate transaction, escrow is used to ensure that the buyer’s funds are securely held until all the terms of the sale, such as the transfer of the property title, have been completed. In addition, the escrow agent may also be responsible for completing tasks such as ordering a title search, obtaining necessary documentation, and disbursing funds according to the instructions of the parties involved in the transaction. During this process you may hear the term title insurance and you might wonder what it is. Title insurance is like a safety net around your property. Sometimes hidden mistakes in previous deeds, mortgages, easements or other recorded documents might give someone else an ownership stake in the property. It is important for you to get Title Insurance to protect you and your home as it will save you time and money in the future if problems arise. You can learn more about it in our “What is title insurance and why is it important?” blog. Read it here.
In conclusion
Escrow is an important tool that helps to protect the interests of both buyers and sellers in a real estate transaction. It ensures that the transaction is completed smoothly and according to the agreed upon terms, and helps to reduce the risk of disputes or issues arising. If you are buying or selling a property, it is important for you to understand the role of escrow and how it can benefit you.
If you are ready to connect with an agent or have any further questions, please don’t hesitate to connect with us today by clicking here. If you are just getting started on your home buying journey, consider reviewing these real estate terms to help you along the way.
Love Letters to the Sellers
LOVE LETTERS TO THE SELLERS
There’s nothing quite like falling in love… with a home.
Every buyer has had that moment where, after what seems like an eternity of searching, they found “the one.” The home that’s vaulted ceiling, wood floors, large backyard, or perfect layout bring so much joy and visions of the future they “have to have it.”
For buyers, purchasing a home is as much of an emotional decision as it is financial/practical one. The same is true for the seller. The offers sellers receive aren’t just for a piece of land and a house; they are for a home. A place where they’ve spent hours of their life with family and friends. A place filled with memories of both tears and laughter. This emotional connection is something many buyers have been able to use to connect with sellers and possibly get a leg up in the offer process.
How? They write a love letter to the seller!
A love letter to the seller is a letter the buyer writes and delivers along with their offer to tell the seller a little bit about themselves and why they love the home. Although this practice isn’t necessarily new, it is steadily gaining in popularity. Like mentioned before; selling a home is an emotional decision. Bringing humanity into the transaction can often sway a seller in favor of the buyer they feel they know.
There is a flip side, though. Letters to the seller aren’t always the right choice. For some sellers the property might be one of investment instead of residence or the letter might backfire and cause more issue than it resolves. One Windermere agent recounted the time a buyer’s letter described how much she looked forward to her daughter growing up in the house. It turned out the sellers were not able to have children and the letter had brought up some rather unexpected negative feelings.
Love letters can also pose some legal complications for the seller. Anti-discrimination laws imposed both federally and locally do not allow sellers to select which offer they will accept on the basis of protected class identity (race, religion, gender, familial status, etc).
Suppose a seller gets a handful of similar offers on a property and a few have submitted letters along with their offer. If the seller verbally expresses to their agent, neighbor, or even a friend that they chose the buyer based on familial status (“We liked them best because they were a young family”), they are inadvertently put at risk for a fair housing lawsuit.
This doesn’t mean love letters are illegal. It simply means both buyers and sellers should be mindful when sending and receiving letters. All housing decisions should ultimately be made on the terms of the offer, not the identity of the buyers.
Sellers should always review all offer documents with their agent and ask about fair housing laws if they are confused or concerned. The most important thing is to make sure their final decision is not made based on the buyer’s demographics, but on if they are willing and able to purchase.
Buyers should try and understand the history and motivation of the seller. Did they live in the house? Design the home? Lose a spouse there? This information can help a buyer understand which topics are safe to mentions in the letter and which topics to avoid. However, the best practice for a buyer in EVERY letter to the seller is to focus on the home. Talk about the features you appreciate, what drew you to it, and overall why you think it’s the perfect home for you.
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