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What is Escrow?

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Let's talk about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is used to assure your home closes on time and the transaction goes smoothly. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a good way to picture an escrow company.

The escrow holder insures that all terms and conditions of the seller's and buyer's agreement are completed prior to the sale being finalized. This includes receiving monies and certificates, signing required forms, and obtaining the release documents for any loans or liens that have been cleared with the transaction, assuring you have a clear title to your home before the agreed upon price is fully paid.

These are the records that escrow agents usually compile:

  • 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
  • Title insurance policies

You're ready to close when all parts are finished in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. Title to the property is then transferred to you as new homeowner and correct title insurance is issued as noted in the escrow instructions.

At the close of escrow, payments of funds are made in an acceptable form to the escrow. As your REALTOR, I'll inform you of the acceptable way of paying.

The Escrow Holder Will:

  • Prepare escrow instructions
  • Perform a title inquiry
  • Meet the bank's requirements as specified in the escrow agreement
  • Accept funds from the buyer
  • Prorate tax, interest, insurance and other fees 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 met
  • Disburse monies and finish instructions

The Escrow Holder Won't:

  • Tell you what's best - the escrow holder has to remain an impartial, third-party status
  • Give insight about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow guidelines
  • Petition title search
  • Comply with the bank's requirements as specified in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other documents as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse monies and finalize instructions
  • Give advice - the escrow company must stay at a fair, third-party status
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Once you have the basics of the escrow process down, you can be a confident buyer.

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