In real estate, an escrow account is a secure holding area where important items (e.g., the earnest money check and contracts) are kept safe by an escrow company until the deal is closed and the house officially changes hands.
Escrow is also a contractual arrangement in which a third party—usually the escrow officer—maintains money and documents until the deal is done.
How escrow works
The escrow agent is a third party—perhaps someone from the real estate closing company, an attorney, or a title company agent (customs vary by state), says Carriene a real estate professional with Precision Realty & Associates.
The third party is there to make sure everything during the transaction proceeds smoothly, including the transfers of money and documents. Escrow protects all the relevant parties in a real estate transaction by ensuring that no funds from your lender and property change hands until all conditions in the agreement have been met.
Once all conditions are met and the transaction is finalized, the money due to the sellers is transferred from your lender to them. Meanwhile an escrow officer clears (or records) the title, which means the buyer officially owns the home.
How much does escrow cost?
That varies—as well as whether the buyer or seller (or both) pays—with the fee for this real estate service typically totaling about 1% to 2% of the cost of the home.
The earnest money deposit
Earnest money—also known as an escrow deposit—is a dollar amount buyers put into an escrow account after a seller accepts their offer. The escrow company will hold onto that money for the duration of the transaction.
Another way to think of earnest money is as a "good-faith” deposit into an escrow account that will compensate the seller if the buyer breaches the contract and fails to close.
What is an escrow account?
When you make your monthly payment to your lender, part of it goes toward your mortgage and part of it goes into your escrow account for property taxes and insurance premiums such as homeowners insurance or mortgage insurance. When those bills are due, your lender will use the funds in your escrow account to pay them.
How escrow protects you
Escrow may seem like a pain, but here's how it can work in your favor. Let's say, for example, the buyer had a home inspection contingency and discovered that the roof needed repairs. The seller agrees to fix the roof. However, during the buyer's final walk-through, she finds that the roof hasn’t been repaired as expected. In this case, the seller won’t see a dime of the buyer’s money until the roof is fixed. Talk about a nice safeguard!
Sellers benefit from escrow, too:
Let's say the buyers get cold feet at the last minute and bail on the transaction. This may be disappointing to the seller, but at the very least, buyers have typically ponied up a sizable chunk of change for their earnest money deposit. This money, often totaling 1% to 2% of the purchase price of a home, has been held in escrow. When buyers back out with no legitimate reason, they forfeit that money to the seller—a decent consolation for the sale's failure.
Escrow, in other words, is the equivalent of bumpers on cars, keeping everyone safe as they move forward in a real estate transaction. Odds are, no one's trying to swindle anyone. But isn't it nice to know that if something does go wrong, escrow is there to cushion the blow?
For a more information, There’s no substitute for the expertise of a Realtor® Carriene Porter @ Precision Realty & Associates LLC, has access to a vast database of information with recently listed and recent sold to help you home in. CALL Today 801-809-9866. 

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