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Escrow: When you're closing on your new property, an escrow holder is used to make sure the transaction will close without problems and in a timely manner. Escrow companies hold money for "safe-keeping" in an exchange between a buyer and seller. For example, in a Web transaction, PayPal is the neutral third party that obtains the buyer's funds, and then hands over the money to the seller.

The escrow holder insures that all terms and conditions of the seller's and buyer's contract are met prior to the sale being finished. This includes getting monies and certificates, signing required forms, and obtaining the release documents for any loans or liens that are to be paid with the transaction, assuring you have a free title to your property before the agreed upon price is fully paid.

These are the records that escrow agents usually compile:

  • 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

Closing on the home takes place when all of the procedures of the escrow are finished. All debts and fees are taken 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 new owner and correct title insurance is issued as noted in the escrow instructions.

The escrow agent 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:

  • Assemble escrow instructions
  • Perform a title inquiry
  • Meet lender's requirements as written in the escrow agreement
  • Receive 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 terms of agreement of seller and buyer have been met
  • Disburse monies and finish instructions

The Escrow Holder Won't:

  • Offer advice - the escrow agent stays a neutral, third-party status
  • Give insight about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow instructions
  • Request title research
  • Comply with lender's requirements as outlined in the escrow agreement
  • Accept funds from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse payments and finalize instructions
  • Tell you what's best - the escrow agent stays a neutral, third-party status
  • Dispense opinions about future tax estimations

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.

Once you have the ABCs of the escrow process down, you can be a more assured buyer.

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