Serving New Jersey Clients Since 1977

Will you need escrow money to buy a home?

Not every home purchase will require putting money in escrow. However, if you will need to have escrow, it is helpful to understand how it works and why it is a requirement.

Escrow is money put into an account by the buyer. It is a percentage of the purchase price and helps to prove your intent to buy. It serves several purposes.

Protects the seller

Once you go into escrow, meaning you have put money into an account, the buyer has to remove the property from the market. If you were to back out of the deal, the buyer would have lost time on the market when they could have sold to another buyer. Having the escrow money gives them a safeguard because if you decide not to buy and do not have a valid reason, that money can go to the seller.

Protects you

Putting money in escrow also provides you protection. It helps you have money toward your downpayment and for closing costs. It also guaranteed that you can have proper inspections done on the property and get repairs if needed.

Important note

Escrow in this sense is an account prior to buying a home. It is not the same as an escrow account your lender may require for paying taxes and insurance costs after you secure the mortgage.

You may not have to pay escrow money. It often depends on the current real estate market. If it is competitive, you may need to put money in escrow to avoid losing the home to another buyer.