Escrow: To finish the sale of a home, a neutral, third party (the escrow holder) is employed to assure the transaction will close appropriately and on time. A home is said to be in escrow when in the closing process, payment is held by a third party on behalf of a buyer and a seller when the transaction is taking place. For example, in an online purchase, PayPal is the neutral third party that obtains the buyer's money, and then disburses the money to the seller.
The escrow holder insures that all terms and conditions of the seller's and buyer's contract are reached prior to the sale being completed. This includes receiving monies and records, filling out required forms, and obtaining the release documents for any loans or liens that were paid with the transaction, assuring you have a free title to your home before the asking price is fully paid.
The certificates the escrow holder may obtain include:
- Fire and other insurance policies
- 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
Upon completion of all portions of the escrow, closing can take place. All payments owed and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then obtain the title to the house and the title insurance gets issued as agreed upon in the escrow instructions.
At the close of escrow, fees are paid in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.