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Escrow 101

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Escrow: To finish the sale of a home, a neutral, third party (the escrow holder) is brought into the picture to assure the transaction will close appropriately and on time. Escrow agents hold money for "safe-keeping" in transactions between a buyer and seller. PayPal is a simple way to think of an escrow company.

The escrow holder insures that all terms and conditions of the seller's and buyer's agreement are met prior to the sale being finalized. This includes getting payments and certificates, filling out required forms, and getting the release documents for any loans or liens that were paid with the transaction, assuring you have a clean title to your house before the asking price is fully paid.

The pieces of paperwork the escrow holder may collect include:

  • 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

Closing on the property happens when the steps of the escrow are finished. At this time, all payments and dues for inspections, title insurance and real estate commissions are taken. Title to the house is then given to you as new owner and correct title insurance is issued as outlined in the escrow policy.

The escrow holder receives a payment when the closing is complete. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Write escrow instructions
  • Petition title inquiry
  • Comply with lender's guidelines as specified in the escrow agreement
  • Receive funds from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are met
  • Disburse payments and finish instructions

The Escrow Holder Won't:

  • Offer advice - the escrow company must maintain a neutral, 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 research
  • Comply with the bank's standards as outlined in the escrow agreement
  • Receive funds from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse monies and finish instructions
  • Give advice - the escrow company must stay at a fair, third-party status
  • Offer opinions about the outcome of your taxes

Mortgage Escrow Account

A Mortgage Escrow Account is used to pay recurring fees while there is a loan on the house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

Now you know more about being in escrow. And, you can be a smarter home buyer and future homeowner.

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