Need some help because I can't figure out what type of account this is.
epitoma
Member Posts: 10
I flip houses using other peoples money (loan) secured by a lien position on that property.
When we open escrow at our title company to make the purchase, the title company opens an escrow account at a bank. The lender funds are deposited in that escrow account (which the title company controls). During the escrow process, expenses are deducted from that account (the purchase price of the property, title fees, insurance, HOA transfer fees, prepaid interest, etc). On close of escrow the property is deeded to my company as the new owner, any remaining funds from the escrow account are deposited into my business checking, and the escrow account is closed. At this point I can begin my repairs of the property using those funds.
I need to keep track of the escrow account in Wave however I can see it being a few different types of accounts. An escrow account is a cash account per se, but it has very restricted uses which only title can do. Usually the account is only active for 1-3 weeks depending and then it's zeroed out when the remainder is refunded to my business checking. I was considering making it a Short Term Asset account however I noticed Wave has some restrictions on how you can view short term assets, and that's really inconvenient. I could make it a straight up Cash Account which isn't exactly accurate. Anyone have some expertise on this?
Comments
What restrictions are you experiencing by classifying the escrow account as a short term asset?
Personally, I would create each escrow acc under "Other Short-Term Asset".