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What is Escrow?

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Let's talk about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is used to assure your property closes on time and the process goes smoothly. A property is said to be in escrow when in the closing transaction, payment is held by a third party on behalf of two parties when the exchange of money takes place. PayPal is a simple way to think of an escrow company.

The escrow company insures that all terms and conditions of the seller's and buyer's negotiated agreement are reached prior to the sale being finished. This includes receiving payments and records, finishing required forms, and seeking out the release documents for any loans or liens that were paid off with the transaction, assuring you have a free title to your property before the purchase price is fully paid.

These are the legal documents that escrow companies usually look for:

  • 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

Closing on the property takes place when the steps of the escrow are complete. All expenses like title insurance, inspections and real estate commissions are paid. You'll then obtain the title to the home and the title insurance gets issued as noted in the escrow instructions.

At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. As your agent, I'll let you know what is an acceptable form of payment.

The Escrow Holder Will:

  • Prepare escrow instructions
  • Perform a title research
  • Comply with lender's guidelines as specified in the escrow agreement
  • Accept funds 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 instructions of seller and buyer have been finished
  • Disburse funds and finalize instructions

The Escrow Holder Won't:

  • Tell you what's best - the escrow company must stay at a fair, third-party status
  • Give insight about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow guidelines
  • Request title search
  • Comply with the bank's requirements as specified in the escrow agreement
  • Receive funds from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse funds and finalize instructions
  • Tell you what's best - the escrow holder stays a neutral, third-party status
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account

A Mortgage Escrow Account is established to make payments for rolling expenses while there is a loan on the house. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.

Once you have the basics of the escrow process down, you can be a better buyer.

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