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Escrow 101

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Escrow: An escrow holder is used to assure your home closes on time and the process goes smoothly. A home is said to be in escrow when in the closing process, payment is secured by a third party on behalf of a buyer and a seller when the transaction is taking place. An everyday way to think of what an escrow company does is to think of how you might use PayPal for online purchases.

The escrow agent is careful to assure that all terms and conditions of the seller's and buyer's contract are met prior to the sale being finalized. This includes getting payments and certificates, finishing required forms, and getting the release documents for any loans or liens that were cleared with the transaction, assuring you have a free title to your home before the agreed upon price is fully paid.

These are the documents that escrow companies usually compile:

  • Tax statements
  • 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

You're ready to close when every step is done in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. The home's title goes to you and title insurance begins per the steps of your particular escrow process.

The escrow company gets a payment at the completion of closing. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Prepare escrow guidelines
  • Perform a title inquiry
  • Comply with lender's guidelines as written in the escrow agreement
  • Intake payments from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • 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 payments and finalize instructions

The Escrow Holder Will Not:

  • Advise you - the escrow agent stays a neutral, third-party status
  • Give insight about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow guidelines
  • Perform a title search
  • Meet the bank's guidelines as noted in the escrow agreement
  • Intake funds from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • Record deeds and other paperwork as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been finished
  • Disburse monies and finish instructions
  • Advise you - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

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

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