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What is Escrow?

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Let's talk about "escrow". To finalize the sale of a home, a neutral, third party (the escrow holder) is employed to assure the transaction will close properly and on time. A house is said to be in escrow when in the closing transaction, payment is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. For example, in an Internet transaction, PayPal is the reliable third party that holds the buyer's funds, and then sends the money to the seller.

Tying up any loose ends like taking in funds, finishing forms, obtaining the documents for loans and liens, and making sure you get a clear title to the home before your purchase gets finalized are all part of the job of the escrow holder.

The records the escrow company may collect include:

  • 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

You're ready to close when each step of the complete in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. You'll then receive the title to the property and the title insurance gets issued as agreed upon in the escrow instructions.

When closing is in it's last step, you'll pay the fees to the escrow agent. As your real estate agents, we'll inform you of the acceptable form of payment.

The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Request title inquiry
  • Comply with lender's requirements as written in the escrow agreement
  • Intake 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 complete
  • Disburse monies and finish instructions
  • Tell you what's best - the escrow agent stays a neutral, third-party status
  • Offer opinions about the outcome of your taxes

Mortgage Escrow Account

A Mortgage Escrow Account is established to pay recurring fees while there is a loan on the house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

This is a quick run-down of the escrow process. Your specific methods will be slightly different based on your lender and your escrow holder.

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