The median price for a home sale in the Salt Lake City area was $601,000 in 2022. But, of course, some homes sell for more while others sell for less.
In any case, home sales require earnest money. The buyer puts money down when issuing their offer, and the money goes into an escrow account.
You might have questions about the escrow process if you're buying or selling a house, and you should find these answers before getting too far into the process.
Continue reading this guide to learn about the escrow process for buyers and sellers.
What Is Escrow?
You might hear the term "escrow" twice when buying a home.
One type of escrow is the type that lenders require for home buying. A lender requires a borrower to save money monthly to pay for their taxes and insurance. Then, the money goes into an escrow account.
Using this type of escrow helps you budget your money.
However, there is another type of escrow you should understand when buying or selling real estate.
The other type is a fund used to hold the earnest money a buyer provides when issuing an offer to a home seller. Buyers put money down in good faith. This money shows the buyer is serious about the offer.
But, the seller receives this money only when the deal closes.
How Does the Escrow Process Work?
As you can see, the home-buying process requires escrow, but how does this process work? The process begins when a buyer gives a check as earnest money for a home purchase.
The buyer's real estate agent takes this check and places it in a bank account called an escrow account. Escrow companies offer accounts to hold this money, and escrow companies are neutral parties.
The escrow company is a third party with no stake in the buyer or seller. They hold the money to keep it safe during the negotiations and home-selling process.
What Are the Potential Outcomes for the Money?
The money you place in escrow during the home-buying or selling process remains in this account until the home sale closes.
When the buyer and seller meet for the closing appointment, the money transfers from the escrow account to the home seller. This money is part of the profit the seller receives from the sale.
However, sellers might not receive this money. For example, the buyer will receive the money if the deal falls through for a valid reason.
Suppose the buyer gets a real estate inspection and finds major problems with the home's structure. The buyer can back out of the contract, which means they will receive their earnest money back.
The buyer will lose this money if they back out of the deal without a valid reason. In this case, the seller gets to keep the escrow money.
Seek Professional Help When Buying or Selling
The escrow process is a routine part of a home sale. So you should understand this process if buying or selling. You might also need to seek professional help when buying or selling.
Contact us if you live in Salt Lake City, UT. We offer real estate services and can help you when buying or selling a house.