What is the primary purpose of escrowing taxes in a real estate transaction?

The primary purpose of escrowing taxes in a real estate transaction is to ensure that property taxes are paid on time. When an escrow account is established as part of the mortgage process, part of the monthly mortgage payment is allocated to cover property taxes. This system helps prevent delinquency issues by automatically setting aside funds, so that the property taxes can be paid when they are due.

This method provides peace of mind for both the lender and the homeowner, as it mitigates the risk of a tax lien being placed on the property due to missed payments. The escrow arrangement thus plays a critical role in maintaining the financial health of the property throughout its ownership.