Let's talk about "escrow". To close the sale of a home, a neutral, third party (the escrow holder) is brought into the picture to assure the transaction will close properly and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an online purchase, PayPal is the secure third party that obtains the buyer's money, and then hands over the money to the seller.
Settling the last details like obtaining funds, signing forms, securing the documents for loans and liens, and assuring you get a clean title to the house in preparation of your purchase gets finalized are all parts of closing in which an escrow agent is useful.
Escrow companies collect the following legal documents:
- 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
Upon completion of all instructions of the escrow, closing can take place. All payments owed and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the home is then transferred to you as new owner and appropriate title insurance is issued as outlined in the escrow policy.
At the close of escrow, payments of funds are made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.