Escrow: To close the sale of a house, a neutral, third party (the escrow agent) is engaged to assure the transaction will close properly 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 Internet transaction, PayPal is the secure third party that obtains the buyer's funds, and then sends the money to the seller.
The escrow company insures that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being finalized. This includes receiving funds and records, finishing required forms, and getting the release documents for any loans or liens that have been paid off with the transaction, assuring you have a free title to your place before the asking price is fully paid.
These are the records that escrow agents usually look to collect:
- Title insurance policies
- 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
Closing on the property takes place when all of the procedures of the escrow are complete. All outstanding payments 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 transferred to you as new owner and appropriate title insurance is issued as outlined in the escrow policy.
The escrow company receives a payment at the completion of closing. I'll keep you informed on the next steps.