In real estate transactions, there needs to be a way for the buyer to guarantee that the seller will indeed pay the funds agreed upon.
Similarly, the buyer needs a way to guarantee that, once his or her deposit is paid, the seller will hand over the deed or title to the property.
This is where escrow comes into play and can help make both parties life easier.
What is Escrow?
As a for sale by owner home seller, you are responsible for setting up, or opening, the escrow account. The escrow agent will be a third-party who is responsible for holding the title or deed to the property as well as earnest deposits made on behalf of the buyer. The purpose of an escrow is to hold legal documents and money until certain conditions, agreed by you and the buyer. The escrow agent will hold money and property ownership until these conditions have been met.
In many for sale by owner transactions, both the seller and the buyer open escrow accounts. There is no standard way of one or the other. Rather, it depends on what you and the buyer agree.
To process your escrow instructions accordingly, the escrow agent might ask you for several pieces of information. You might not have all the information available immediately, but you should get it to the escrow agent as soon as possible. This information includes, but is not limited, to the following: