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What is Escrow?

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Let's talk about "escrow". An escrow company is used to assure your home closes on time and the process goes smoothly. Escrow holders hold money for "safe-keeping" in a deal between a buyer and seller. 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 met prior to the sale being finalized.

These are the documents that escrow holders usually look to collect:

  • 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 finished in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. You'll then obtain the title to the home and the title insurance gets dispersed as outlined 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:

  • Write escrow guidelines
  • Request title search
  • Meet the bank's guidelines as outlined in the escrow agreement
  • Accept payments from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer are complete
  • Disburse monies and finalize instructions

The Escrow Holder Will Not:

  • Tell you what's best - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow instructions
  • Perform a title inquiry
  • Comply with lender's standards as written in the escrow agreement
  • Receive payments from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse payments and finalize instructions
  • Tell you what's best - the escrow agent stays a neutral, 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. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

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