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Completing the Transaction
Escrow: To close the sale of a home, a neutral, third party (the escrow company) is brought into the picture to assure the process will close properly and on time. Escrow agents hold money for "safe-keeping" in a deal between a buyer and seller. For example, in an online auction, PayPal is the secure third party that holds the buyer's money, and then hands over the funds to the seller.
The escrow holder makes sure that the terms and conditions of the agreement between the seller and buyer are completed in preparation of the sale being finished.
Escrow agents collect the following pieces of paperwork:
- 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
- Terms of sale and any seller-assisted financing
Upon finishing of all instructions of the escrow, closing can take place. All payments owed and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the house is then given to you as buyer and related title insurance is issued as outlined in the escrow policy.
At the close of escrow, 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 guidelines
- Request title inquiry
- Meet the bank's requirements as specified in the escrow agreement
- Accept funds from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other legal documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer are complete
- Disburse monies and finish instructions
The Escrow Holder Won't:
- Advise you - the escrow company must stay at a fair, third-party status
- Give insight about future tax estimations
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The Escrow Holder Will:
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The Escrow Holder Won't:
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- Prepare escrow guidelines
- Petition title research
- Meet the bank's standards as written in the escrow agreement
- Intake payments from the buyer
- Prorate tax, interest, insurance and other fees according to guidelines
- Record deeds and other paperwork as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been met
- Disburse monies and finalize instructions
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- Give advice - the escrow company must stay at a fair, third-party status
- Offer opinions about the outcome of your taxes
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Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. 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 specific methods may vary depending on your bank and your escrow company.