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

The escrow agent insures that all terms and conditions of the seller's and buyer's negotiated agreement are met prior to the sale being completed. This includes securing payments and paperwork, filling out required forms, and getting the release documents for any loans or liens that were cleared with the transaction, assuring you have a clean title to your property before the purchase price is fully paid.

The pieces of paperwork the escrow agent may obtain include:

  • 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
  • Terms of sale and any seller-assisted financing

You're ready to close when each step of the done in escrow process. All payments owed and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the home is then given to you as new owner and appropriate title insurance is issued as noted in the escrow instructions.

The escrow agent receives a payment at the completion of closing. I'll keep you informed on the next steps.

The Escrow Holder Will:

  • Write escrow guidelines
  • Perform a title search
  • Comply with lender's standards as noted in the escrow agreement
  • Intake funds from the buyer
  • Prorate tax, interest, insurance and other fees 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 payments and finalize instructions

The Escrow Holder Won't:

  • Give advice - the escrow holder has to remain an impartial, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Petition title search
  • Comply with the bank's standards as specified in the escrow agreement
  • Accept payments from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been finished
  • Disburse payments and finalize instructions
  • Advise you - the escrow holder must stay at a fair, third-party status
  • Offer opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is used to make payments for on-going expenses 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 confident home buyer and future homeowner.

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