Two Ways Escrow Can Make It Easier To Buy A Home

There are many tools available that can make buying a home easier and more secure, and escrow is one of them. Escrow is a process where a neutral third party holds onto money or important documents, and only provides access to them after certain conditions are met. Although the process of setting up an escrow account and making transfers this way can be a bit of pain, here are two ways it can benefit you when you finally decide to buy a home.

Ensure Seller Follows Through on Promises

Sellers will make a lot of promises to get buyers to purchase their homes. While most sellers keep their word and follow through on those promises, this is not always the case. It's not unusual for some buyers to conveniently forget about the agreements they made during the sales process (or put minimal effort into following through) once they get the check for the purchase price of their homes.

This is where escrow can shine. As noted previously, the items held in escrow won't be released until the conditions set by the creator of the account are met. You can put some or all the money for the home's purchase into escrow and the seller won't get any of it unless and until he or she makes good on his or her promises.

For instance, if the seller agreed to replace the aging air conditioner, but you discover on a walkthrough that the person didn't do it, you can refuse to release the money in the escrow account until the new air conditioner is installed.

Be aware, though, that you must be careful to define all the conditions that must be met before the seller can access the funds in escrow. If you fail to include something crucial, the seller could get the money and leave you stuck with an incomplete contract.

Avoid Inappropriate Money Transfers

Another way escrow can help you during the home buying process is to avoid inappropriate money transfers that may hurt your chances of closing on the home. This is an issue of concern when it comes to allowances the seller may give you for buying the house, such as repair or decorative allowances.

It is illegal for sellers to give buyers money to purchase a home, and these types of allowances can be problematic because there's generally no way to prove the money will be spent on what the allowance was given for before the home closes. Thus, the lender may think the seller is trying to give the buyer a kickback and cancel the loan.

By putting the money in escrow and clearly defining the conditions for withdrawal, you can allay the lender's concerns and provide proof after the sale that the money in escrow was spent on the repairs or renovations.

For more information on this and other tools that can be helpful when buying a home, contact a business such as Summit Real Estate.