Escrow: To finish the sale of a home, a neutral, third party (the escrow company) is engaged to assure the transaction will close properly and on time. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. A simple way to understand what an escrow company does is to compare it to PayPal for Internet purchases.
The escrow holder insures that all terms and conditions of the seller's and buyer's contract are reached prior to the sale being completed. This includes receiving payments and documents, signing required forms, and getting the release documents for any loans or liens that were paid off with the transaction, assuring you have a clean title to your place before the agreed upon price is fully paid.
The documents the escrow agent 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
Upon finishing of all portions of the escrow, closing can take place. At this time, all payments and fees for inspections, title insurance and real estate commissions are paid out. You'll then secure the title to the property and the title insurance gets issued as stated in the escrow instructions.
The escrow holder gets a payment when the closing is complete. I'll keep you updated on the next steps.