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What is Escrow?

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Let's talk about "escrow". To finish the sale of a place, a neutral, third party (the escrow holder) is engaged to assure the process will close perfectly and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. An easy way to think of what an escrow company does is to think of the use of PayPal for online purchases.

The escrow company insures that all terms and conditions of the seller's and buyer's contract are met prior to the sale being finished. This includes receiving funds and documents, completing required forms, and seeking out the release documents for any loans or liens that were paid off with the transaction, assuring you have a clean title to your property before the purchase price is fully paid.

The pieces of paperwork the escrow agent 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

You're ready to close when all steps are complete in escrow process. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. You'll then get the title to the house and the title insurance gets dispersed as noted in the escrow instructions.

At the close of escrow, payments are submitted in an acceptable form to the escrow. I'll keep you informed on the next steps.

The Escrow Holder Will:

  • Prepare escrow guidelines
  • Perform a title inquiry
  • Comply with lender's guidelines as specified 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 terms of agreement of seller and buyer are complete
  • Disburse monies and finish instructions

The Escrow Holder Won't:

  • Give advice - the escrow holder stays at an impartial, third-party status
  • Give insight about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow guidelines
  • Perform a title research
  • Comply with lender's guidelines as noted 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
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse payments and finalize instructions
  • Give advice - the escrow holder has to remain an impartial, third-party status
  • Dispense opinions about tax implications

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 familiar with the escrow process, you can be a confident buyer.

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