Escrow: When you're closing on your new house, an escrow company is used to make sure the transaction will close without problems and on time. Escrow companies hold money for "safe-keeping" in a deal between a buyer and seller. For example, in a Web purchase, PayPal is the secure third party that holds the buyer's funds, and then hands over the payment to the seller.
The escrow company makes sure that the terms and conditions of the agreement between the seller and buyer are completed in preparation of the sale being finalized.
These are the legal forms that escrow companies usually compile:
- 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
- Loan documents
- Tax statements
You're ready to close when every step is complete in escrow process. At this time, all payments and dues for inspections, title insurance and real estate commissions are taken. You'll then obtain the title to the property and the title insurance gets issued as noted in the escrow instructions.
The escrow holder receives a payment when the closing is complete. You'll know when it's time to submit the form of payment.