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What is Escrow?

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Let's talk about "escrow". To finalize the sale of a place, a neutral, third party (the escrow agent) is engaged to assure the process will close perfectly and on time. Escrow holders hold money for "safe-keeping" in an exchange between a buyer and seller. For example, in a Web auction, PayPal is the secure third party that obtains the buyer's cash, and then sends the funds to the seller.

The escrow holder makes sure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being finalized. This includes getting payments and paperwork, filling out required forms, and obtaining the release documents for any loans or liens that were paid with the transaction, assuring you have a clear title to your home before the negotiated price is fully paid.

The documents the escrow company may collect include:

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

Upon completion of all portions of the escrow, closing can take place. At this time, all payments and fees for inspections, title insurance and real estate commissions are taken. The property's title gets transferred to you and title insurance is issued per the steps of your individual escrow process.

The escrow agent receives a payment at the completion of closing. As your real estate professional, I'll let you know what is an acceptable form of payment.

The Escrow Holder Will:

  • Write escrow instructions
  • Request title search
  • Comply with lender's requirements as outlined in the escrow agreement
  • Intake funds from the buyer
  • Prorate tax, interest, insurance and other fees according to instructions
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse funds and finalize instructions

The Escrow Holder Will Not:

  • Tell you what's best - the escrow agent must stay at a fair, third-party status
  • Offer opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Perform a title inquiry
  • Comply with the bank's requirements as outlined in the escrow agreement
  • Intake funds from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are met
  • Disburse payments and finish instructions
  • Give advice - the escrow holder has to remain an impartial, third-party status
  • Give insight about future tax estimations

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

Once you have the rules of the escrow process down, you can be a more assured buyer.

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