When an investor makes a decision to purchase property, one of the tools that is available to mitigate risks, and which is used in major developed markets, is the financial figure of the escrow account.
When a real estate transaction is said to be in escrow, this means that a negotiation has taken place between the purchaser and the seller. The parties involved have agreed on the terms and at least some earnest money has been deposited in an impartial third account that will hold the funds in custody until the conditions the parties have agreed upon have been fulfilled.
The escrow agent acts as a neutral third party to receive the required funds, from the initial deposit of earnest money to the different milestone payments to complete the transaction.
Escrow services are available in Mexico and have become widely accepted for use in the completion of thousands of transactions. Indeed, escrow has become a great tool for providing safe and secure financial transactions.
Here are some of the reasons why every investor should consider it:
For the protection of investment money
- Escrow funds are held by an independent third party who will protect the money of the buyerand the seller by following the written instructions that they have provided.
To avoid potential misunderstandings
- As the conditions for the release of funds are clearly written in the escrow instructions, there can be no room for misinterpretation regarding the conditions for payments.
For protection and reputation of realtor and agent
- If a realtor recommends to clients that they use an escrow agent, this not only shows that the realtor is truly working with the best interests of the clients in mind but also demonstrates the realtor’s professionalism and credibility. Using an escrow agent also protects the realtor’s own interest as realtors get paid commissions directly by the escrow agents.
Above all – To ensure transparent transactions
- Both parties can have a clear financial statement regarding how the money is managed and disbursed. Every milestone is communicated when conditions are met, and it is clearly stated who pays when and to whom the money is released. All closing costs and third-party payments may be handled through escrow and the instructions will clearly state the details of such disbursements. This means that the entire process is transparent, which gives additional security to the investor.