Buying a home is one of the most exciting, albeit stressful experiences in your life. If you plan on taking out a loan to pay for your home, you will most likely be required to establish an escrow account. What is an escrow account, and how will it affect your tax return?

One of the most challenging aspects of accounting for real estate lawyers involves managing escrow accounts. Neglecting to check and re-check escrow transactions can bring on time-consuming, expensive problems that affect your clients as well as your reputation.

In an earlier post, Ann Irons explained how real estate lawyers can improve financial management through use of budgets, accounts receivables policy, and cash flow analysis. Irons, a CPA in Bellingham, MA, goes on to outline the benefits of internal controls and how they impact the financial health of your practice.

In our years of experience working closely with law firms, we’ve heard all kinds of horror stories about attorneys whose shoddy accounting practices cost them a great deal of stress and added expenses. Ann Irons, a CPA who provides escrow accounting in Bellingham, MA, shares basic guidelines for avoiding costly mistakes.

If you plan to finance your new home purchase, your lender may require you to establish an escrow account, or it may set one up for you. If you are paying cash for your home, or if your lender does not have a similar requirement in place, it may still be in your best interest to set up an account. Ann Irons, a CPA who provides escrow accounting in Bellingham, MA, helps you decide whether to open an escrow account.

As a Bellingham, MA CPA who specializes in taxes and accounting for real estate law firms, Ann Irons has experience with both sides of real estate sales transactions. A CPA is an invaluable resource for anyone considering the purchase of a new home, offering guidance on managing finances, tax planning, and reporting requirements involved with home ownership.

Purchasing a new home is a major milestone for you, your family, and especially your bank account. Like most homebuyers, you probably financed a large chunk of your purchase and must now pay a mortgage payment each month. Ann Irons, a CPA who offers escrow accounting in Bellingham, MA, explains relationships between your mortgage and escrow accounts.

Client trust funds are a potential source of contention in any legal specialty, and real estate law is no exception. Ann Irons, an experienced CPA who offers escrow accounting in Bellingham, MA, shares tips for avoiding costly trust account violations.

Practicing law and managing a practice are two separate functions, neither of which leaves room for error.

The more precautions you take to perform well in the latter, the more freedom you are given to focus on the former. Ann Irons, who offers accounting for Bellingham real estate lawyers, discusses the importance of timeliness and efficiency in managing your practice’s accounting functions.

Time Is of the Essence: What It Means in a Court of Law

You may recall the 2002 case Owen v. Kessler in which the “time is of the essence” clause was put to the test when a real estate broker failed to deliver a would-be buyer’s signed purchase and sale agreement within the allotted time frame. A second interested party filed a backup offer contingent on the failure of the first buyer to complete the purchase. Both prospective buyers filed suit against the seller, at which point the Superior Court sided with the first buyer. The ruling was ultimately reversed in Appeals Court in favor of the second buyer. The delay that set it all in motion? 15 minutes. The reason for the delay? The broker responsible for delivering the agreement reasoned that because the document’s destination was only four minutes from his office, there would be no problem delivering it on the very last day of the agreed-upon two-week period.

Fifteen minutes doesn’t sound like too much of a delay. It’s not uncommon to be late to work by 15 minutes every now and then, or for the bus to arrive 15 minutes late. But when you’re talking about a legal obligation, 15 minutes can do a great deal of damage. By the time the Appeals Court’s decision was handed down, all parties had incurred thousands of dollars in expenses and countless lost hours.

If you’ve ever agreed to an informal bet with a friend, and asked a third party to hold the tangibles until the bet has run its course, you’ve already completed something similar to opening an escrow account. When you decide to take out a mortgage to purchase a home, you may consider opening an escrow account, which serves as a “middle man” for your property tax, fire and hazard insurance premiums, mortgage insurance premiums and other item payments. The office of Ann Irons, CPA explains the basics to understanding an escrow account in the following article. 

What Is An Escrow Account?

Escrow accounts provide a guarantee that your property taxes, associated premiums, and associated insurances are paid on time. The account also guarantees that there is always enough money to pay for these obligations, avoiding the risk of lapsed insurance coverage, or errant taxes. Also, an escrow account allows for the homeowner to live in comfort, not having to worry about producing several lump sum payments with inconsistent due dates throughout the year. Your obligatory payments are punctual and recurrent.