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Let's talk about "escrow". An escrow company is brought on to assure your house closes on time and the closing process goes smoothly. A house is said to be in escrow when in the closing process, funds is secured by a third party on behalf of two parties when the exchange of money takes place. PayPal is a good way to picture an escrow company.

The escrow company insures that all terms and conditions of the seller's and buyer's contract are reached prior to the sale being completed. This includes securing funds and paperwork, completing required forms, and seeking out the release documents for any loans or liens that were paid with the transaction, assuring you have a clear title to your place before the negotiated price is fully paid.

The documents the escrow agent may obtain include:

  • 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
  • Title insurance policies

Upon completion of all instructions of the escrow, closing can take place. At this time, all payments and fees for inspections, title insurance and real estate commissions are taken. Title to the home is then transferred to you as now current homeowner and correct title insurance is issued as noted in the escrow policy.

At the close of escrow, payments are submitted in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Write escrow instructions
  • Petition title inquiry
  • Comply with the bank's requirements as written in the escrow agreement
  • Receive payments from the buyer
  • Prorate insurance, tax, interest 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 are met
  • Disburse monies and finish instructions

The Escrow Holder Will Not:

  • Give advice - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Petition title inquiry
  • Comply with lender's standards as specified in the escrow agreement
  • Intake payments from the buyer
  • Prorate tax, interest, insurance and other fees 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 finish instructions
  • Offer advice - the escrow agent stays a neutral, third-party status
  • Offer opinions about the outcome of your taxes

Mortgage Escrow Account

A Mortgage Escrow Account is used to pay on-going 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.

This is a simple outline of the escrow process. Your individual methods may be slightly different depending on your lender and your escrow company.

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