First, a little about "escrow". To finish the sale of a place, a neutral, third party (the escrow agent) is engaged to assure the process will close correctly and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an online purchase, PayPal is the reliable third party that obtains the buyer's payment, and then hands over the payment to the seller.
Tying up any loose ends like obtaining funds, signing forms, securing the documents for loans and liens, and making sure you get a clear title to the home before your purchase gets finalized are all parts of closing in which an escrow company is useful.
Escrow holders compile the following legal documents:
- Loan documents
- Tax statements
- 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
Closing on the home happens when the steps of the escrow are complete. At this time, all payments and fees for inspections, title insurance and real estate commissions are collected. The home's title goes to you and title insurance is issued per the policies of your particular escrow process.
When closing is done, you'll pay the fees to the escrow company. You'll know when it's time to submit the form of payment.