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Let's talk about "escrow". To complete the sale of a property, a neutral, third party (the escrow holder) is employed to assure the transaction will close appropriately 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 everyday way to understand the concept of what an escrow company does is to think of how you might use PayPal for online purchases.

The escrow holder is careful to assure that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being finalized. This includes securing payments and records, completing required forms, and seeking out the release documents for any loans or liens that have been cleared with the transaction, assuring you have a clean title to your place before the negotiated price is fully paid.

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

  • 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
  • Loan documents

Upon completion of all instructions of the escrow, closing can take place. All debts and fees are collected 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 dispersed as noted in the escrow instructions.

The escrow company gets a payment when the closing is complete. As your agent, I'll let you know what is an acceptable way of paying.

The Escrow Holder Will:

  • Prepare escrow instructions
  • Request title inquiry
  • Comply with lender's requirements as noted in the escrow agreement
  • Accept funds 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 instructions of seller and buyer have been finished
  • Disburse payments and finalize instructions

The Escrow Holder Will Not:

  • Offer advice - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow instructions
  • Perform a title search
  • Meet the bank's guidelines as outlined in the escrow agreement
  • Intake payments from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • 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 finish instructions
  • Offer advice - the escrow holder must stay at a fair, third-party status
  • Give insight about future tax estimations

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

Once you're at ease with the escrow process, you can be a more assured buyer.

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