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Escrow: To close the sale of a property, a neutral, third party (the escrow agent) is brought into the picture to assure the transaction will close correctly and on time. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. An easy way to understand what an escrow company does is to compare it to PayPal for online purchases.

Clearing the final hurdles like receiving funds, signing forms, getting the documents for loans and liens, and assuring you get a spotless title to the property before your purchase gets finalized are all part of the job of the escrow holder.

Escrow companies compile the following records:

  • Title insurance policies
  • 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

You're ready to close when every step is done in escrow process. All payments owed and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the home is then given to you as now current homeowner and related title insurance is issued as noted in the escrow instructions.

The escrow holder receives a payment at the completion of closing. 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 requirements as specified in the escrow agreement
  • Accept funds from the buyer
  • Prorate interest, insurance, tax 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 have been met
  • Disburse payments and finalize instructions

The Escrow Holder Will Not:

  • Give advice - the escrow agent stays at an impartial, third-party status
  • Offer opinions about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Request title search
  • Meet lender's guidelines as noted in the escrow agreement
  • Intake payments from the buyer
  • Prorate tax, interest, insurance and other fees 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 are complete
  • Disburse payments and finish instructions
  • Offer advice - the escrow company stays a neutral, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is used to pay rolling fees while there is a loan on the house. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

Now you know more about how to close on your future home. And, you can be a more informed home buyer and future homeowner.

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