“E-S-C-R-O-W“- sounds like quite a heavy word, right? But the process is quite simple. Well, only if you are able to grasp the concept, that is. So, read on. Escrow is a neutral third-party trust account, where the funds are held until deal completion. Now, it does not matter when, where or how you will be buying a new property but being Escrow-Ready before hand could probably prove beneficial. As the heading rightly says- “it is the life blood of all your property transactions” and the reason that is because it protects both parties and helps avoid the risk of litigation. Say, you have fixed the property you intend on buying, so you transfer your down payment into the neutral Escrow Account. However, due to some reason, you change your mind and do not want to buy that property any longer. By parking your funds in an Escrow Account, both the buyer and the seller are returned their fair share at the same time.
Escrow derived from the term ‘Escroue‘ which means a contract written on a parchment in French. It falls in a Niche product segment in India because it is a process that has been newly initiated here. Contrarily, Escrow caters for a much larger market around the world. Almost everyone is familiar with the process, and a lot of people are using it as well. As of now, Escrow accounts are mainly focused on protecting down payment while buying or selling a property in and around India. However, in the US, Escrow services are being used in a myriad of concepts, such as – banking, real estate, mergers & acquisitions, law, and international trade.
Now that we have established as to why Escrow is an important resource, let’s look at what were to happen if you were to go ahead without being Escrow-Ready: You would be at a conventionally high risk if you were to plan on buying a property without Escrow. On the off chance, if the deal were to backfire, you could either lose the money, or the property and your seller may not even be verified. This could lead to a litigation. 65% of the court cases in India are related to property matters and it takes about 3 years for the final verdict and for the case to close. Sounds quite stressful. Why not avoid all this hassle in the first place?
The Escrow process, along with the rest of the homebuying process needn’t cause any headaches. Deciding if whether you require an escrow account or not, is entirely up to you. However, as has been said in the very beginning, it could prove to be useful when you are buying or selling a property. Hope this article has provided you with enough information to make you feel comfortable with your homebuying journey.