An escrow is an agreement between the Buyer and the Seller to hire the services of an escrow agent, such as a commercial  bank or a financial institution, to acts as a third party or intermediary for buyers and sellers to protect each other’s interest in exchange for a fee. An Escrow Agreement is dratfed  by the escrow agent and are signed by the Buyer and Seller to outline the conditions and guidelines of the sale.

Buyer Protection:

An escrow protects all parties of the buying transaction as the buyer deposits the money in an escrow account which the escrow agent holds on to until the title or documents of ownership are transferred to the buyer’s name. This becomes very beneficial when unforeseen instances makes the title nontransferable such as the existence of unknown encumbrances, liens, claims, court cases and etc which may not have been annotated on the title at the time of purchase. Without the escrow, the buyer would have fully paid the seller for a property with a nontransferable title. Without the escrow, the sale is deemed final and the buyer may have to file a costly court case and wait for several years to get their money back. The escrow also helps the buyer secure a property at the soonest possible time as it gives the seller an assurance that you are serious about the purchase and seals the deal in your favor as a Deed of Sale is executed in favor of the buyer and are to be surrendered along with all documents of ownership to the escrow agent upon depositing the money with minimal risk to the buyer.The buyer need not worry about the hassles of paying all their buying taxes and transferring the documents of ownership to their name as the licensed  Realtor involved in the escrow will do everything for them. The escrow agent only releases the money to the seller once all the conditions of the escrow agreement have been fulfilled. If the conditions are not met, the escrow agreement is deemed to have failed and the money is returned to the buyer.

Seller Protection:

An escrow protects all parties of the selling transaction as they are guaranteed by the escrow agent that the buyer has deposited the amount of the sale into an escrow account that was opened in favor of the seller. The seller is assured by the commercial bank that the payment of the buyer is real unlike in some cases that some monies paid to the seller in the form of cash or manager's checks are counterfeit. It also shows the buyer the seller's good faith in selling a property that is deemed transferable and registrable and makes the buyer feel the transaction is sound to avoid costly back outs. In cases of multiple ownership by siblings, family members, friends or partners, the proceeds of the sale are automatically subdivided,  pro-rated to ownership shares to protect all the sellers involved, after taxes and expenses have been paid. Bickering is then eliminated on who gets the proceeds , how the recipient intends to pay the taxes and expenses of the sale and how the recipient intends to distribute the remaining funds to all the other registered owners. The seller also does not have to shell out any money for taxes and expenses as they are deducted directly from the escrow account. The seller also need not to worry about settling their selling taxes and transferring the documents of ownership as the licensed Realtor involved in the escrow will do everything for them. The escrow agent also hold in their possession the absolute deed of sale and other documents of ownership for their safekeeping and are never released to the buyer until all the conditions of the escrow have been fulfilled. If the conditions are not met, the escrow agreement is deemed to have failed and the original documents of ownership and the Absolute Deed of Sale is returned to the seller.

Release of Payment and Documents:

Once the transferred title and / or other documents of ownership are submitted to the escrow agent, reviewed and have been noted to follow all the conditions of the escrow agreement, then the escrow agent releases the money to the Seller and the documents of ownership to the Buyer.

Fees:

The buyer is usually the one who pays the escrow fee which costs anywhere from a fixed amount of P30K up or a percentage of 1% up or a combination of both. Your Licensed Realtor may know of a reputable and reasonably priced escrow agent who handles his buying and selling transactions already.