Escrow- typically used by a mortgage company to hold your money to pay your insurance and taxes annually.
Did you know you can use an escrow account to hold your earnest money to buy a house if you have to sell your house first?
How it works:
1. You will typically put about 10% of the sale price of a home “in escrow”. On a $150,000 home, that’s $15,000
2. You have your real estate agent draw up a contract on the house that you want to buy, specifying the1.Final price, 2.Time sellers will take the house off the market (6mo, 12 mo, 18mo) and 3. Amount of escrow earnest $ you will put at risk (sometimes it’s non-refundable and the seller gets it if the buyer can’t sell their property in the allotted time, sometimes it is refundable to the buyer).
2. As buyer, your real estate agent has a title company create an escrow account
3. After the contract is agreed upon by buyer and seller, the buyer wire- transfers the earnest money to escrow, typically 10% of the sale price within days of the agreed-upon contract.
4. The buyer has the time specified to sell your property and take the house to purchase off the market 6-18mo.
5. At closing, the escrow $ is used toward the total price.
This can work on super unique properties you may not have expected to find.
Once you sell your property and have a closing date, the $ from the sale of your home can go into that escrow account for the closing.
And now you know.
Image modified from mainstreet.com