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Escrow: To finalize the sale of a property, a neutral, third party (the escrow agent) is employed to assure the process will close appropriately and on time. A place is said to be in escrow when in the closing transaction, funds is held by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. PayPal is a good way to picture an escrow company.

Tying up any loose ends like obtaining funds, completing forms, securing the documents for loans and liens, and assuring you get a clear title to the property in preparation of your purchase gets finalized are all part of the job of the escrow holder.

The pieces of paperwork the escrow holder may obtain include:

  • Terms of sale and any seller-assisted financing
  • 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

Closing on the home takes place when the steps of the escrow are complete. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. Title to the home is then given to you as new homeowner and correct title insurance is issued as outlined in the escrow instructions.

The escrow company gets a payment at the completion of closing. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

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

The Escrow Holder Won't:

  • Give advice - the escrow company stays at an impartial, third-party status
  • Give insight about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow guidelines
  • Request title inquiry
  • Meet lender's requirements as noted in the escrow agreement
  • Receive funds from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been met
  • Disburse funds and finalize instructions
  • Advise you - the escrow agent must maintain a neutral, third-party status
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account

A Mortgage Escrow Account is used to pay recurring expenses while there is a loan on the house. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.

This is a easy to understand guide about the escrow process. Your particular process will vary based on your lender and your escrow holder.

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