First, a little about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is brought on to assure your house closes on time and the money exchanging part of closing goes smoothly. Escrow holders hold money for "safe-keeping" in a deal between a buyer and seller. For example, in a Web auction, PayPal is the reliable third party that holds the buyer's money, and then disburses the payment to the seller.
Clearing the final hurdles like obtaining funds, signing forms, obtaining the documents for loans and liens, and making sure you get a clear title to the home prior to your purchase gets finalized are all parts of closing in which an escrow agent is useful.
These are the legal forms that escrow holders usually compile:
- 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 finishing of all instructions of the escrow, closing can take place. All payments owed and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then secure the title to the property and the title insurance gets issued as outlined in the escrow instructions.
The escrow agent receives a payment at the completion of closing. I'll keep you updated on the next steps.