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What is Escrow?
Escrow: A neutral, third party (known as the escrow holder or the escrow agent) is used to assure your property closes on time and the process goes smoothly.
Escrow agents hold money for "safe-keeping" in a deal between a buyer and seller.
For example, in a Web purchase, PayPal is the reliable third party that obtains the buyer's funds, and then sends the funds to the seller.
The escrow agent makes sure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being finished. This includes receiving monies and paperwork, finishing required forms, and getting the release documents for any loans or liens that were paid with the transaction, assuring you have a clean title to your property before the final price is fully paid.
These are the legal forms that escrow holders usually look for:
- 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
- Title 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.
Title to the house is then given to you as now current homeowner and correct title insurance is issued as outlined in the escrow instructions.
At the close of escrow, payment of funds shall be made in an acceptable form to the escrow.
As your agent, I'll let you know what is an acceptable way of paying.
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The Escrow Holder Will: |
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The Escrow Holder Won't: |
- Assemble escrow guidelines
- Petition title search
- Meet lender's requirements as specified in the escrow agreement
- Accept funds from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse payments and finalize instructions
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- Tell you what's best - the escrow holder has to remain an impartial, third-party status
- Offer opinions about future tax estimations
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Mortgage Escrow Account
A Mortgage Escrow Account is established to make payments for on-going 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 individual methods could vary based on your bank and your escrow holder.