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What is Escrow?

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Escrow: To complete the sale of a home, a neutral, third party (the escrow holder) is employed to assure the transaction will close appropriately and on time. Escrow companies hold money for "safe-keeping" in an exchange between a buyer and seller. An everyday way to understand what an escrow company does is to think of how you might use PayPal for online purchases.

Clearing the final hurdles like taking in funds, completing forms, getting the documents for loans and liens, and making sure you get a clear title to the property prior to your purchase gets finalized are all part of the job of the escrow company.

The records the escrow company may secure include:

  • 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

Upon completion of all portions of the escrow, closing can take place. All debts 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 new owner and appropriate title insurance is issued as outlined in the escrow instructions.

The escrow company gets a payment when the closing is complete. I'll keep you updated on the next steps.

The Escrow Holder Will:

  • Prepare escrow guidelines
  • Petition title search
  • Meet lender's requirements as written in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other legal documents as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse payments and finish instructions

The Escrow Holder Won't:

  • Tell you what's best - the escrow company must maintain a neutral, third-party status
  • Offer opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Request title research
  • Meet the bank's requirements as noted in the escrow agreement
  • Intake payments from the buyer
  • Prorate tax, interest, insurance and other fees according to instructions
  • Record deeds and other documents as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse payments and finalize instructions
  • Tell you what's best - the escrow holder stays at an impartial, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is started to pay rolling fees while there is a loan on the house. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

Now you know more about being in escrow. And, you can be a more informed home buyer and future homeowner.

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