So you want to save that hefty real estate commission? Many people buy or sell their first nests as a "For Sale By Owner". When you sell your home through a real estate agent, you'll typically pay 6 percent in fees to that agent for her services. On a $250,000 home, that means $15,000 would go to the agent; that sales commission saved can be spent on more fun things like that new barbecue grill or plasma TV.
Realtors generally hold buyers' earnest money deposits in their escrow accounts for closing. If you choose to bypass a real estate agent in the home sale, another third party can act as your escrow agent.
TL;DR (Too Long; Didn't Read)
If you don't involve a real estate agent in your home sale, a title company or attorney will often act as the escrow agent.
What Is Escrow Anyway?
A real estate broker's escrow account holds money in trust until a property sale closes. When you make an offer on a home, the seller usually requires an earnest money deposit. That deposit is held in escrow until closing when it is applied to the buyer's closing costs. If the buyer backs out of the deal without good cause, the seller may be entitled to the deposit for breach of contract.
Title Companies Offer Escrow Services
Title companies often serve as escrow agents when real estate agents are not involved in property sales. An earnest money deposit check can be made payable directly to a title company for deposit into its escrow account.
If the title company is also providing title work and handling closing documents, there typically is no extra charge for escrow services. You may also retain a title company exclusively for its escrow services. Escrow fees vary between title companies.
Attorneys Act as Escrow Agents
Most attorneys have lawyers' trust accounts. A lawyer may hold an earnest money deposit in his trust account for a real estate transaction. If a buyer and seller both have lawyers, they must agree on which attorney holds the deposit.
A deposit is generally safe in either lawyer's trust account since it may only be released under specific circumstances. Lawyers may charge separate fees for escrow services, or they may include them in comprehensive closing service packages.
Have an Escrow Agreement
Generally, a party holding real estate escrow funds requires the buyer and seller sign an escrow agreement. Escrow agreements state what happens to escrow funds if the buyer and seller have a dispute. The money cannot be released to either the buyer or seller contrary to the agreement.
Most of the time, escrow funds are not the subject of big battles. Most nest purchases end in happy closings.
Maggie Lourdes is a full-time attorney in southeast Michigan. She teaches law at Cleary University in Ann Arbor and online for National University in San Diego. Her writing has been featured in "Realtor Magazine," the N.Y. State Bar's "Health Law Journal," "Oakland County Legal News," "Michigan Probate & Estate Planning Journal," "Eye Spy Magazine" and "Surplus Today" magazine.