What does Escrow do?
Escrow, in its simplest sense, is a neutral 3rd party that holds onto any funds in a transaction, then distributes the funds according to instructions that the buyer and seller have agreed upon. The service also transfers the property from the sellers name to yours to “close” the transaction.
An “escrow officer” or a closing attorney usually performs the escrow tasks. This person cannot give you legal advice because they are a neutral 3rd party and are only there to make sure all written agreements between you and the seller are carried out properly.
How is an escrow officer or closing attorney chosen? It depends on your local customs so ask your Buyer’s Agent.
Earnest Money and Good Faith Deposits are two names for the same thing, depending on where you live. They are a deposit you make at or around the time you make your offer. This is to show that you are “earnest” or serious about your offer. Local customs will help you decide how much you should give as a deposit and can vary from 1% of your offer to as high as 10%.
Don’t worry, your deposit goes toward your down payment or closing costs. It’s NOT an additional fee on top of your other expenses.
A higher amount of earnest money will make the seller think you are more serious about your offer. There are typically several ways for a buyer to cancel a sale and still get your deposit back (during specified timelines.) See Removing Contingencies & Your Final Walkthrough.
Carefully study the Sale Agreement wording to make sure you understand how and when you are allowed to get your earnest money back.
Thinking of buying a home in the Portland, Oregon area? Checkout our First Time Home Buying Classes!Escrow, Earnest Money & Good Faith Deposits,
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