What is escrow and how does it work?
In: Economics
Another example, you (or your mommy and daddy since you’re five) are buying a house with cash (kinda’ unrealistic these days, but it’s simple). You have a bank account and the seller has a bank account. You, or your title company or real estate agent, opens a third bank account, called the “escrow account”. You put the cash for the house sale into that third account. The seller can’t touch it (yet).
Then, after 30 or 45 days, assuming all went well, the escrow company closes the escrow account and transfers the money to the seller, and the title company hands you the keys (usually indirectly). So when someone says “we closed on our new house today” it means just what I described above. The escrow bank account gets closed, the seller gets the cash, and you own the house by virtue of the title company transfering the property title to your name and handing your the keys, which you throw away after changing the locks.
It’s a little more complicated when there’s a lender, like a mortgage company, involved, but the mechanics are largely the same.
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