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Real Estate: Tom Kelly
The Real Estate Adviser |
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May 14, 2009
The Real Estate Adviser: Reserves need better explanation at closing
By Tom Kelly
Special to the Journal
Special to the Journal
Ienjoy escrow “reserves” or “impounds” about as much as I enjoy having my car impounded. However, the former can be classified as a safeguard to prevent a mistake, and the latter, the result of a mistake.
When a home sale closes escrow, lenders require sums of money known as reserves to pay taxes, hazard insurance and personal mortgage insurance. The amount of these impounds depends on when in the calendar year the deal is signed. For example, if a sale were finalized today, more money could be held in reserve for taxes than if the deal were to be closed six weeks down the road.
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