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Let's talk about "escrow". To finish the sale of a house, a neutral, third party (the escrow holder) is brought into the picture to assure the process will close correctly and on time.
When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow.
A simple way to think of what an escrow company does is to think of how you might use PayPal for Internet purchases.
The escrow holder makes sure that the terms and conditions of the agreement between the two parties are completed prior to the sale being finished.
These are the documents that escrow holders usually look for:
- 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 completion of all portions of the escrow, closing can take place.
At this time, all payments and fees for inspections, title insurance and real estate commissions are paid out.
Title to the home is then transferred to you as new homeowner and related title insurance is issued as outlined in the escrow policy.
When closing is done, you'll submit a payment to the escrow holder.
You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow instructions
- Perform a title inquiry
- Meet the bank's standards as outlined in the escrow agreement
- Accept funds 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 are met
- Disburse payments and finalize instructions
- Offer advice - the escrow holder must stay at a fair, third-party status
- Give insight about tax implications
Mortgage Escrow Account
A Mortgage Escrow Account is used to pay rolling expenses while there is a loan on the house.
Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
Now you know more about how to close on your future home. And, you can be a smarter home buyer and future homeowner.