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Let's talk about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is brought on to assure your house closes on time and the transaction goes smoothly. Escrow companies hold money for "safe-keeping" in an exchange between a buyer and seller. For example, in an Internet auction, PayPal is the secure third party that obtains the buyer's funds, and then disburses the payment to the seller.

Settling the last details like receiving funds, completing forms, securing the documents for loans and liens, and assuring you get a clean title to the property in preparation of your purchase gets finalized are all part of the job of the escrow agent.

The records the escrow company may obtain include:

  • Requests for payment for various services to be paid out of escrow funds
  • Loan documents
  • Tax statements
  • Fire and other insurance policies
  • Title insurance policies
  • Terms of sale and any seller-assisted financing

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 collected. You'll then get the title to the home and the title insurance gets dispersed as outlined in the escrow instructions.

When closing is in it's last step, you'll pay the fees to the escrow company. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Write escrow instructions
  • Petition title search
  • Comply with lender's standards as written in the escrow agreement
  • Intake payments from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • 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 Will Not:

  • Tell you what's best - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Request title inquiry
  • Comply with the bank's standards as outlined in the escrow agreement
  • Intake payments from the buyer
  • Prorate tax, interest, insurance and other fees according to instructions
  • Record deeds and other documents as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse payments and finalize instructions
  • Advise you - the escrow company stays a neutral, third-party status
  • Offer 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. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

Once you're familiar with the escrow process, you can be a better buyer.

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