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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 hired to assure your home closes on time and the transaction goes smoothly. When funds are 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.

Settling the last details like taking in funds, finishing forms, securing the documents for loans and liens, and making sure you get a spotless title to the home before your purchase gets finalized are all part of the job of the escrow agent.

These are the documents that escrow agents usually look for:

  • 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

Closing on the home happens when the steps of the escrow are done. All payments owed and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). The house's title gets transferred to you and title insurance is issued per the steps of your individual escrow agreement.

When closing is in it's last step, you'll make a payment to the escrow company. As your real estate agent, I'll let you know what is an acceptable way of paying.

The Escrow Holder Will:

  • Prepare escrow guidelines
  • Request title inquiry
  • Meet lender's standards as written 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 met
  • Disburse funds and finish instructions

The Escrow Holder Won't:

  • Offer advice - the escrow company stays a neutral, third-party status
  • Give insight about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow instructions
  • Petition title inquiry
  • Meet the bank's requirements as outlined in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been met
  • Disburse monies and finalize instructions
  • Advise you - the escrow holder must maintain a neutral, third-party status
  • Dispense opinions about future tax estimations

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

This is a simple outline of the escrow process. Your particular process could be unique based on your lender and your escrow agent.

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