Escrow: To complete the sale of a home, a neutral, third party (the escrow holder) is engaged 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 transaction, PayPal is the neutral third party that obtains the buyer's payment, and then hands over the money to the seller.
Tying up any loose ends like receiving funds, completing forms, getting the documents for loans and liens, and making sure you get a clear title to the house before your purchase gets finalized are all part of the job of the escrow agent.
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
Closing on the house takes place when the steps of the escrow are finished. At this time, all payments and dues for inspections, title insurance and real estate commissions are paid out. The home's title is given to you and title insurance begins per the policies of your individual escrow agreement.
The escrow company gets a payment at the completion of closing. I'll keep you updated on the next steps.