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Escrow: To finish the sale of a property, a neutral, third party (the escrow agent) is brought into the picture to assure the process will close correctly and on time. Escrow holders hold money for "safe-keeping" in an exchange between a buyer and seller. A simple way to understand the concept of what an escrow company does is to think of how you might use PayPal for online purchases.

The escrow holder makes sure that all terms and conditions of the seller's and buyer's contract are performed prior to the sale being completed. This includes securing funds and documents, completing required forms, and getting the release documents for any loans or liens that have been paid with the transaction, assuring you have a clean title to your property before the negotiated price is fully paid.

Escrow holders look for the following pieces of paperwork:

  • 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. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. You'll then obtain the title to the property and the title insurance gets dispersed as agreed upon in the escrow instructions.

The escrow holder gets a payment at the completion of closing. I'll keep you updated on the next steps.

The Escrow Holder Will:

  • Write escrow instructions
  • Request title inquiry
  • Comply with the bank's requirements as specified in the escrow agreement
  • Intake funds from the buyer
  • Prorate insurance, tax, interest 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 have been finished
  • Disburse monies and finish instructions

The Escrow Holder Won't:

  • Offer advice - the escrow holder stays a neutral, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow instructions
  • Petition title search
  • Comply with the bank's requirements as noted in the escrow agreement
  • Intake funds from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse funds and finish instructions
  • Offer advice - the escrow holder must maintain a neutral, third-party status
  • Dispense opinions about tax implications

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.

This is a quick run-down of the escrow process. Your specific plan will be slightly different depending on your bank and your escrow holder.

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