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What is Escrow?

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Let's talk about "escrow". To complete the sale of a property, a neutral, third party (the escrow agent) is employed to assure the process will close correctly and on time. Escrow agents hold money for "safe-keeping" in transactions between a buyer and seller. PayPal is a good example of an escrow company.

The escrow holder insures that all terms and conditions of the seller's and buyer's contract are met prior to the sale being finished. This includes getting monies and records, filling out required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you have a clear title to your place before the agreed upon price is fully paid.

These are the records that escrow agents usually look to collect:

  • 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
  • Loan documents

You're ready to close when each step of the finished in escrow process. All outstanding payments and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). The property's title gets transferred to you and title insurance begins per the policies of your individual escrow process.

The escrow company gets a payment at the completion of closing. I'll keep you informed on the next steps.

The Escrow Holder Will:

  • Write escrow instructions
  • Petition title research
  • Comply with lender's guidelines as noted in the escrow agreement
  • Intake funds from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other documents as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer have been met
  • Disburse monies and finish instructions

The Escrow Holder Will Not:

  • Offer advice - the escrow company has to remain an impartial, third-party status
  • Give insight about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow guidelines
  • Petition title inquiry
  • Comply with lender's guidelines as written in the escrow agreement
  • Receive funds from the buyer
  • Prorate interest, insurance, tax and other payments 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 met
  • Disburse monies and finalize instructions
  • Give advice - the escrow holder has to remain an impartial, third-party status
  • Offer opinions about the outcome of your taxes

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.

Now you know more about being in escrow. And, you can be a more informed home buyer and future homeowner.

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