What Is A Real Estate Escrow Account? - YouTube

In this episode, we're going to learn  what is a real estate escrow account?

So stay tuned, we're going to  explain it from top to bottom.

In this episode, we're going to talk about what  is a real estate escrow account and at the end  

of this episode, for everyone that hangs around.  I'm going to give you a free hard copy of my book  

My Life & 1,000 Houses: Failing Forward to Financial Freedom. It's about 400 pages and all

I ask is that you pay for the shipping and handling  and I'll get it to you. It's about seven bucks and  

I'm also going to throw in a free creative  real estate webinar. So check it out, I'll get  

both of them to you. I'll get the webinar to you  digitally and I'll send this out in the mail.

So let's dive right in. The definition of real estate  escrow account is simple enough but the do's and  

don'ts of a real estate escrow account might be  a little more intricate than you might think.

So, stick around we're going to talk about those. We're going to cover four things. For sure, we're going to

give you the definition of real estate escrow  account. Then we're going to talk to you about  

the different kinds of accounts and the need for  accurate accounting and why it's so important.

And then, we're going to discuss something you  absolutely cannot do with an escrow account and

if you do it you're looking for trouble. So stick  around we're going to talk about those things.

So I'm going to read to you the formal definition  of real estate escrow account and this is how it reads.

"The escrow is an account separate from the  mortgage account. Where deposit of funds occur for  

payment of certain conditions that apply to the  mortgage. Usually, property taxes and insurance." 

This definition defines the most popular  use of real estate escrow accounts. This

is when someone is sending you or sending in a  principal interest taxes and insurance payment, 

and so when someone sends me their payment for  their mortgage and I collect the PITI principal,  

interest, taxes, insurance. I immediately have to  separate out the taxes and the insurance person  

and I have to put it in a separate account away  from my personal money, which is the return of my  

principal and the earning of my interest. That's  my money it goes in my operating account. But the

money that's not for me has to be moved off into  a separate account called an "Escrow Account".  

Other types of escrow accounts could be like at your  title company. You send in moneys to buy a property  

and the title company has to hold that money in  escrow until the formal signing of the documents  

and the transfer is done. They can't keep your  money in their operating account either. It has  

to be a separate escrow account. You can also have  escrow accounts with like an attorney. Let's say,  

I have a seller and I'm the buyer and we gonna go  to an attorney to agree on a certain set of things.

They might even hold documents in escrow. Like,  he's gonna sign the release and give it to the attorney. 

So that when I finish the roof the attorney  will give me the release of the lien on the property.

You know, I don't trust this man to give  me the document. So we're going to go get  

a neutral party and he's going to hold  these documents in escrow. When (A) happens, 

he's going to release this form. When (B) happens,  he'll release this form. So you can also hold

documents in escrow to be released when some  service or function or payment has been met.

By now you might be figuring out that the  importance of accounting in these accounts  

is huge. You have to have good accounting because  you don't just put one person's escrow amounts  

into the escrow account. You might be putting  a hundred people's escrow amounts into that  

account. What I'm saying is, I have many people who  pay me mortgages every month. I have one escrow  

account. I put the escrow for their taxes and the  escrow for their insurance in that account times  

300 people. So, you have to have accurate accounting. So when it's time to pay Mrs. Jones's taxes and  

insurance, I know exactly how much was put in  for Mrs. Jones. When it's time to pay Mr. Smith's  

taxes and insurance, I know exactly how much Mr. Smith sent in. So you have to have very accurate  

accounting from the get-go. Now, there's this  one thing that you absolutely cannot do with  

an escrow account or you could find yourself in  boiling hot water, okay. Now, before I get to that.

I want you to take a look at that like and  that share button and if you find these  

episodes inspiring or motivating or helpful in any  way. Could you please hit that like button and that  

share button and let the world know that we're  out here and that we're doing a good job. Also,  

if you have not subscribed please subscribe right  now. The one thing you absolutely cannot do with an  

escrow account is commingled it with your own  operating account. When you have escrow funds or  

funds to be escrowed they have to remain separate,  from the very beginning of the time they received  

to the time they're paid out. They can never be  commingled, you can't use it for anything personal.  

The money just sits over there. You're not even  allowed to charge or have the money in an interest  

bearing account. If you did that, you would have  to do accounting that would be out of this world. 

Because the interest doesn't belong to you it  belongs to the people whose money you are storing. 

So, number one, do not ever co-mingle or use escrow  accounts for your personal operations. Number two, 

don't put it in an interest-bearing account just  put it in an account and let it set and that is  

the thing you must not do. So we're at the end  of this episode and as promised, I would like to  

deliver to you a free hard copy of my book, My Life & 1,000 Houses: Failing Forward to Financial

Freedom. It's free to you, all I ask is that  you pay the seven dollar shipping and handling  

and for doing that. I'm gonna digitally download  to you right away a webinar on owner financing 101.

My owner financing 101 webinar will explain  to you exactly how I've bought and sold  

hundreds if not thousands of houses  and seller finance them for profit.

So, go to 1000houses.com/free-stuff and scroll up and down

the page until you see the link that  reads seven dollar book plus webinar.