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What is Escrow?
First, a little about "escrow". An escrow agent is hired to assure your property closes on time and the money exchanging part of closing goes smoothly.
Escrow companies hold money for "safe-keeping" in a deal between a buyer and seller.
For example, in an Internet transaction, PayPal is the reliable third party that obtains the buyer's money, and then hands over the funds to the seller.
Tying up any loose ends like obtaining funds, completing forms, getting the documents for loans and liens, and assuring you get a spotless title to the property in preparation of your purchase gets finalized are all parts of closing in which an escrow agent is useful.
Escrow agents collect the following forms:
- 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
Upon finishing of all instructions of the escrow, closing can take place.
At this time, all payments and dues for inspections, title insurance and real estate commissions are collected.
The home's title gets transferred to you and title insurance begins per the steps of your particular escrow agreement.
At the close of escrow, payments are submitted in an acceptable form to the escrow.
You'll know when it's time to submit the form of payment.
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The Escrow Holder Will: |
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The Escrow Holder Won't: |
- Prepare escrow guidelines
- Petition title research
- Comply with the bank's guidelines as written in the escrow agreement
- Intake payments 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 have been met
- Disburse payments and finalize instructions
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- Give advice - the escrow company stays a neutral, third-party status
- Offer opinions about future tax estimations
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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.
Once you're familiar with the escrow process, you can be a informed buyer.