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What is Escrow?

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First, a little about "escrow". An escrow company is brought on to assure your place closes on time and the transaction goes smoothly. A place is said to be in escrow when in the closing process, payment is secured by a third party on behalf of two parties when the exchange of money takes place. PayPal is a good way to picture an escrow company.

The escrow agent makes sure that the terms and conditions of the agreement between the seller and buyer are completed in preparation of the sale being completed.

These are the records that escrow companies usually compile:

  • Loan documents
  • 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

Upon completion of all instructions of the escrow, closing can take place. All debts and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the home is then given to you as new homeowner and correct title insurance is issued as outlined in the escrow policy.

When closing is done, you'll pay the fees to the escrow agent. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Assemble escrow guidelines
  • Petition title research
  • Comply with lender's requirements as outlined in the escrow agreement
  • Accept funds from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse funds and finish instructions

The Escrow Holder Won't:

  • Advise you - the escrow holder must maintain a neutral, third-party status
  • Offer opinions about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow instructions
  • Perform a title research
  • Meet lender's standards as written in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other paperwork as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer are complete
  • Disburse monies and finish instructions
  • Give advice - the escrow company must stay at a fair, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is established to make payments for recurring expenses while there is a loan on the house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

This is a easy to understand guide about the escrow process. Your specific process may be unique based on your bank and your escrow agent.


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