A handful of my first-time San Fernando Valley Home Buyers buyers often ask, “why do I have to wire money into an escrow account when buying a home”?
We love this home in the San Fernando Valley…Now what?
After you identify a home that you’d like to finally purchase and put a bid one, your San Fernando Valley Real Estate Agent will help you write an offer or purchase contract. Usually, depositing 3% is quite a common practice within 72 hours of opening escrow when buying real estate in southern California. The EMD (earnest money deposit) is a sign of your good faith and allows you additional time when searching for financing and to complete your due diligence on a property.
Who is Escrow anyway?
Escrow and an escrow officer (the person who handles the sale) is a neutral third party protecting the interests of both you (the San Fernando Valley Home buyer) and the seller. Generally, the home seller selects the escrow company. In addition, escrow is a third party who manages a trust account, in which the agreed upon money is held for the sale. The money is held until both the seller and buyer fulfill their contractual obligations.
Earnest Money Deposit
The earnest money deposit is generally the first money to be transferred into escrow. A variety of San Fernando Valley Real Estate buyers wire transfer funds from their bank account into the escrow account. This wire transfer is used to cover the closing costs which can include an impound account for taxes and insurance. Additionally, the earnest money is also an insurance policy for the sellers in the event the buyers do not perform the transaction beyond the contingency dates or are operating in bad faith, that money is available for seller damages.