First, a little about "escrow". When you're closing on your new property, a neutral, third party (known as the escrow holder or the escrow agent) is used to ensure the process will close properly and in a certain amount of time. A home is said to be in escrow when in the closing process, payment is held 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 online purchase, PayPal is the reliable third party that obtains the buyer's funds, and then sends the money to the seller.
Clearing the final hurdles like receiving funds, signing forms, securing the documents for loans and liens, and assuring you get a clean title to the home in preparation of your purchase gets finalized are all part of the job of the escrow holder.
These are the documents that escrow agents usually compile:
- 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
You're ready to close when all parts are done in escrow process. All payments owed and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then given to you as now current homeowner and related title insurance is issued as outlined in the escrow instructions.
When closing is completed, you'll make a payment to the escrow company. You'll know when it's time to submit the form of payment.