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Escrow 101

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Escrow: An escrow agent is hired to assure your property closes on time and the process goes smoothly. A house is said to be in escrow when in the closing transaction, funds is held by a third party on behalf of a buyer and a seller when the exchange of money takes place. For example, in an online transaction, PayPal is the neutral third party that obtains the buyer's funds, and then sends the payment to the seller.

The escrow agent makes sure that all terms and conditions of the seller's and buyer's agreement are performed prior to the sale being finalized. This includes receiving funds and certificates, filling out required forms, and getting the release documents for any loans or liens that were paid off with the transaction, assuring you have a free title to your home before the final price is fully paid.

The pieces of paperwork the escrow company may secure include:

  • 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

You're ready to close when every step is complete in escrow process. All debts and fees are collected 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 stated in the escrow instructions.

At the close of escrow, in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Assemble escrow instructions
  • Petition title search
  • Comply with lender's requirements as outlined in the escrow agreement
  • Receive funds from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer are complete
  • Disburse funds and finish instructions

The Escrow Holder Won't:

  • Give advice - the escrow holder stays a neutral, third-party status
  • Give insight about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow guidelines
  • Request title search
  • Comply with the bank's requirements as written in the escrow agreement
  • Accept payments from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other legal documents as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are met
  • Disburse funds and finalize instructions
  • Advise you - the escrow agent must maintain a neutral, third-party status
  • Give insight about future tax estimations

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

This is a simple outline of the escrow process. Your particular process will vary depending on your lender and your escrow holder.


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