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Let's talk about "escrow". When you're closing on your new property, an escrow holder is used to assure the transaction will close without problems and in a certain amount of time. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a good way to picture an escrow company.

The escrow agent is careful to assure that all terms and conditions of the seller's and buyer's contract are completed prior to the sale being finished. This includes securing monies and documents, filling out required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you have a free title to your property before the final price is fully paid.

The documents the escrow holder may collect include:

  • Requests for payment for various services to be paid out of escrow funds
  • Loan documents
  • Tax statements
  • Fire and other insurance policies
  • Title insurance policies
  • Terms of sale and any seller-assisted financing

You're ready to close when every step is complete in escrow process. All debts and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then obtain the title to the property and the title insurance gets dispersed as noted in the escrow instructions.

At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Prepare escrow guidelines
  • Perform a title search
  • Comply with lender's guidelines as outlined in the escrow agreement
  • Accept payments from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse funds and finalize instructions

The Escrow Holder Will Not:

  • Tell you what's best - the escrow company has to remain an impartial, third-party status
  • Give insight about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Perform a title inquiry
  • Meet the bank's requirements as written in the escrow agreement
  • Intake payments from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse funds and finish instructions
  • Advise you - the escrow holder stays a neutral, third-party status
  • Give insight about the outcome of your taxes

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

This is a quick run-down of the escrow process. Your specific plan may vary depending on your bank and your escrow agent.