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Escrow: A neutral, third party (known as the escrow holder or the escrow agent) is hired to assure your home closes on time and the money exchanging part of closing goes smoothly. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an Internet auction, PayPal is the secure third party that obtains the buyer's cash, and then hands over the funds to the seller.

The escrow company makes sure that all terms and conditions of the seller's and buyer's agreement are performed prior to the sale being finished. This includes securing monies and records, filling out required forms, and obtaining the release documents for any loans or liens that have been cleared with the transaction, assuring you have a clear title to your place before the final price is fully paid.

These are the records that escrow holders usually look to collect:

  • 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 finishing of all instructions of the escrow, closing can take place. All outstanding payments and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then receive the title to the home and the title insurance gets issued as stated in the escrow instructions.

At the close of escrow, fees are paid in an acceptable form to the escrow. As your agent, I'll let you know what is an acceptable form of payment.

The Escrow Holder Will:

  • Write escrow guidelines
  • Request title research
  • Meet the bank's guidelines as noted in the escrow agreement
  • Accept payments 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 instructions of seller and buyer have been finished
  • Disburse payments and finalize instructions

The Escrow Holder Will Not:

  • Offer advice - the escrow agent stays at an impartial, third-party status
  • Offer opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble 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 legal documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse funds and finish instructions
  • Advise you - the escrow agent must maintain a neutral, third-party status
  • Offer opinions 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. 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.

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

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