hat is escrow? Escrow is expenses. These expenses are
when two or more people hazard homeowners insurance,
or parties enter into a property taxes, mortgage
legal agreement that provides for insurance, and any other amounts
the placement with a third party that are paid on a annual or
for safekeeping certain semi-annual basis. When money is
properties, instruments, or released from an escrow account
assets, and the release of these for the intended use, this is
properties, instruments, or called an escrow disbursement.
assets is contingent on the
performance or fulfillment of Using escrow for these types of
certain conditions or acts. An expenses protects both the
escrow account is an account that borrower and the lender. The
is specifically set up only to borrower gets peace of mind
disburse funds for a specific knowing that the lender can only
reason or use. In real estate access the funds for the intended
investing and other transactions purpose. This guarantees that the
of this type, escrow accounts are lender will not take the monthly
normally used to hold funds that payments for these expenses and
are intended for insurance not apply them towards the
premiums and real estate taxes intended use. The lender can rest
that have been paid in advance easy knowing that the borrower
and can only be released for can not remove the funds or spend
these intended purposes. the money on other things. Both
parties have an assurance that
In real estate, escrow these bills are being met. The
collections are amounts that have lender may be especially
been collected from the borrower interested in the insurance
by the loan provider to be put payments, because if something
into escrow for specific happens to the house and the
insurance premiums have not been specify that it is an escrow
met, then the lender stands to account. The funds in an escrow
loose a lot. If the property account always belong to the
taxes are not paid, the property borrower until the expense the
may be seized for back taxes, account is set up for is paid.
costing either the lender or
borrower more money. This is why It is important to use escrow so
it is important to use escrow for that both parties are protected,
monthly payments of this type. and the funds are held for
specific expenses. This protects
Certain expenses are paid every against fraud, as well as
year or twice a year. Most of the guaranteeing that certain
time borrowers pay one sixth or expenses like property taxes and
one twelfth of these expenses on insurance payments are made on
a monthly basis, and these funds time to protect the lender's
are put into escrow until the interest in the property. The
expense comes due. Always beware home buyer has the security of
of anyone who refuses to put knowing that the money will go
these payments into an escrow exactly where it should, and can
account. not be removed for any other
reason.
Any legitimate real estate
investor or lender will be more Copyright © 2007 Joel Teo. All
than willing to put these amounts rights reserved. (You may publish
into escrow, and if they seem this article in its entirety with
uncomfortable with this that the following author's
should be a red flag concerning information with live links
at least their business only.)
practices, if not their business
ethics. An escrow account should
About the Author:
Joel Teo writes on various financial topics including Las Vegas Real Estate. Learn about Las Vegas Real Estate Investment at http://www.RealEstateInvestment101.info
Read more articles by:
Joel Teo
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