When entering into a contract for deed in Minnesota, it’s important to protect both the buyer and seller throughout the process. A Good Deed understands the complexities of this process and is here to help. In this article, we will explain how our escrow accounts can help protect both parties.
What is an Escrow Account?
An escrow account is a financial arrangement in which a third party holds funds on behalf of two parties involved in a transaction. In the context of a contract for deed, A Good Deed sets aside funds for specific expenses related to the property, such as property taxes and homeowners insurance. This helps ensure that both the buyer and seller are protected throughout the process.
How Does A Good Deed’s Escrow Account Work?
When you work with A Good Deed, the buyer agrees to make monthly payments that include not only the principal and interest on the loan, but also a portion of the annual property taxes and homeowners insurance. This allows the buyer to make regular contributions to the escrow account and maintain sufficient funds to pay these expenses when they are due.
The Importance of an Escrow Analysis
In Minnesota, property taxes are paid twice per year, and homeowners insurance is paid annually. A Good Deed ensures that these expenses are paid on time by collecting 1/12th of the estimated property taxes and homeowners insurance each month, along with the principal and interest payment. When the current year property tax statements become available in March, an updated estimate of property taxes can be calculated and adjusted each spring. This process is known as an “escrow analysis,” and it helps to ensure that the escrow account has sufficient funds to pay the property taxes and homeowners insurance when they are due.
Why Choose A Good Deed?
Having an escrow account in place helps to protect both the buyer and the seller in a contract for deed transaction. For the buyer, it helps to avoid the risk of being hit with a large, unexpected expense when the property taxes and homeowners insurance are due. Additionally, having the funds set aside in the escrow account helps to ensure that the taxes are paid on time and the homeowner’s insurance policy remains in force. For the seller, the escrow account helps to ensure that the buyer is able to maintain the property and keep it adequately insured. This helps to protect the seller’s investment in the property and ensures that the home remains in good condition.
At A Good Deed, we’re here to help you navigate the complexities of contract for deed transactions in Minnesota. Contact us today to schedule a call with one of our experts to discuss your options and how we can help you protect your investment.
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