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Let's talk about "escrow". When you're closing on your new place, an escrow agent is used to assure the transaction will close appropriately and in a timely manner. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an online purchase, PayPal is the neutral third party that holds the buyer's money, and then hands over the payment to the seller.
The escrow agent is careful to assure that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being finalized. This includes receiving payments and documents, completing required forms, and obtaining the release documents for any loans or liens that have been cleared with the transaction, assuring you have a clear title to your place before the purchase price is fully paid.
The certificates the escrow agent may secure include:
- 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
- Fire and other insurance policies
Upon finishing of all instructions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. You'll then get the title to the home and the title insurance gets dispersed as outlined in the escrow instructions.
At the close of escrow, payments of funds are made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow instructions
- Perform a title research
- Meet the bank's standards as outlined in the escrow agreement
- Intake payments from the buyer
- Prorate tax, interest, insurance and other fees according to instructions
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse monies and finalize instructions
- Offer advice - the escrow agent must stay at a fair, third-party status
- Dispense opinions about future tax estimations
Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
Now you know more about how to close on your future home. And, you can be a more informed home buyer and future homeowner.