Understanding Escrow

"We're in escrow!" Maybe you've heard this on a real estate podcast or TV program. But what does it really mean?

Escrow is an "in-between" stage of the home-buying process. It begins once the seller has accepted an offer and ends with the closing. Typically, the buyers wire earnest money (a good-faith deposit) into an escrow account managed by a third party, such as a bank or title company.

Several requirements are completed while the funds are in escrow.

• The lender appraises the property.
• The buyer arranges for inspections.
• The lender provides good-faith estimates for the actual interest rate, loan amount and closing costs.
• The buyer secures homeowners insurance and receives a title report.
• The buyers and sellers, along with their agents, conduct the final walk-through.

Once all conditions of the escrow agreement have been fulfilled, ownership of the property will be transferred to the new owner.