What is Escrow?


Real estate is saturated with so many terms that are unfamiliar and can easily confuse both home buyers and sellers. If you are not a real estate professional, it is not uncommon that you come across these terms that can easily throw you off and one of them is Escrow. Escrow is a term describing a process used when two parties are in the process of finishing a transaction and there are uncertainties over if a party or the other will be able to fulfill the obligations required of them.

To be more explicit, it is the use of an impartial third party that will be in possession of an asset or funds before they are transferred from an individual to another. Typically, the neutral third party will hold the funds until both parties have performed their contractual requirements. The term is mostly associated with real estate transactions, although it can also apply to any other situation involving the transfer of funds from one party to the other. In any case, escrow is a term that house buyers, sellers as well as real estate agents in Chattanooga need to understand properly before getting involved in the buying and selling of properties and this is what this post seeks to do – it teaches you all the basics about escrow.

Escrow agents

The entire process is usually arranged by an agent who runs the buyer escrow account. An escrow agent is a neutral person that has the duty of holding the funds until all concerned parties meet the required conditions, which typically is a transfer of title. Ordinarily, your real estate agent should recommend or get you an escrow agent which is why you need to hire the best agent in Chattanooga, such as Keller Williams of Greater Downtown, so that you can be linked up with a good and reliable one.

Escrow account

An escrow account is the account used before the sale officially goes through. Once the buyer has deposited the payment into the account, the responsibility will then shift to the home seller to hold up their own end of the bargain.

Types of an escrow account

There are different types of escrow accounts in real estate. They include:

  • Home buying: This strictly deals with direct buying and selling of a house. Funds stay in this type of escrow account as form of protection for all parties involved.
  • Monthly payments: A house owner may decide to put a particular amount in their escrow account with every monthly payment, in order to prevent the challenges of dealing with huge annual expenses.
  • Renters, landlords: This type of escrow account can be kept to help protect the interests of renters and also settle disputes.

Who gets the escrow money in a bust deal?

When you are looking for a home for sale in Chattanooga, it is vital to read and comprehend the terms of the contract. You can also let your real estate agent in Chattanooga do this for you with the aid of legal advice. While in general, the buyer collects back the escrow money, in some cases, the seller may be the one receiving it if the buyer backs out without any proper or convincing reason.

Mortgage and escrow

Under a mortgage arrangement, an escrow account is a special holding account which enables house owners to make payment for their property tax bill yearly as well as premiums of homeowners insurance in installments in their normal mortgage payment every month. Rather than paying those bills separately, many homeowners decide to or are asked to have an escrow account with their lender that collects the payments monthly.

What do buyers and sellers stand to gain from Escrow in real estate?

Generally, there are two broad benefits attached to using escrow as a home buyer, seller or real estate agent in Chattanooga. They are:


Escrow gives not only the buyer but also the agent, lender and the seller putting up homes for sale in Chattanooga assurance for all the parties involved in a real estate transaction. Having an escrow agent will help all the transacting parties track and verify the transfer of key elements of the agreement.


Escrow in real estate ensures the safety and protection of the interests and the funds of everyone involved in the transaction. There is a guarantee that you will not be on the losing end at the end of the day so far you fulfill your own obligations.