Real Estate Term of the Day: Escrow, Escrow Account & Escrow Agent
ESCROW – an agreement between two or more parties providing that certain instruments or property be placed with a third party for safe keeping, pending the fulfillment or performance of a specified act or condition (Barron’s Dictionary of Real Estate Terms)
ESCROW ACCOUNT (aka: trust account) – a separate bank account segregated from a broker’s own funds, in which the BROKER is required by state law to deposit all monies collected for clients (Barron’s Dictionary of Real Estate Terms)
ESCROW AGENT – any person engaged in the business of receiving escrows for deposit or delivery (Barron’s Dictionary of Real Estate Terms)
In the State of Colorado, a title company will most likely act as the escrow agent. They will most likely hold the earnest money in their escrow account and will facilitate the duties of the escrow.
An escrow account can also be referenced as a separate account in which the lender puts a portion of each monthly mortgage payment. This provides the lender with the funds needed for such expenses as property taxes, homeowner’s insurance and mortgage insurance. This account is only available for the lender to access when those payments are due and payable. If a mortgage is refinanced those escrow accounts will be closed and any monies left in the account will be returned to the borrower. Keep in mind that new escrow accounts will be set up once you have refinanced.