#1 Escrow account by TimothyHughes 02.10.2022 22:15

A trust account is a temporary deposit held by a third party on behalf of two other parties, usually referred to as a trustee agent. The temporary account works until the process of a transaction is completed and all terms are settled between both parties. The funds or other assets are debited from this account when the pre-determined legal obligations are fulfilled or the trustee receives the order to release the assets.

Escrow accounts are designed differently than regular accounts. The main difference between a trust account and other types of deposit accounts is its temporary nature as it was opened to support a specific transaction. In addition, its administration by a third party is not common in other types of deposit accounts.

Escrow Account Features
While an escrow account can hold securities, funds, money, and other assets, this temporary escrow is more commonly used in real estate transactions. It is used when a buyer wishes to conduct an inspection or other due diligence on the property while ensuring that he or she has sufficient funds to actually purchase the property. In this way, the seller can be sure that if the property is as described, the buyer can buy it and the seller has not wasted his time and money. On the other hand, the buyer can rest assured that their money is safe in escrow and will only be delivered to the seller when they are happy with the conditions of the home and ready to buy it.

Use of an escrow account
An escrow account is also used in mortgage transactions between lenders and borrowers. Typically, the lenders are the ones who require the borrower to make regular deposits into an escrow account. Deposits are used to pay property taxes as well as insurance. Another reason to use an escrow account in real estate transactions is when a property is under construction but a buyer already wants to reserve it for themselves. It is possible to deposit a certain amount of money into the escrow account to ensure that at the time a building is completed, he or she will be first in line to obtain the coveted property.

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