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What is Escrow?
Let's talk about "escrow". When you're closing on your new home, an escrow agent is used to make certain the process will close without problems and in a certain amount of time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. An everyday way to understand the concept of what an escrow company does is to think of how you might use PayPal for Internet purchases.
The escrow company makes sure that the terms and conditions of the agreement between the two parties are performed prior to the sale being finalized.
These are the documents that escrow agents usually compile:
- 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
- Tax statements
Closing on the home takes place when all of the procedures of the escrow are complete. 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 issued as noted in the escrow instructions.
The escrow company receives a payment at the completion of closing. As your real estate agents, we'll let you know what is an acceptable way of paying.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow guidelines
- Petition title research
- Meet lender's guidelines as noted in the escrow agreement
- Receive payments from the buyer
- Prorate interest, insurance, tax and other payments according to instructions
- Record deeds and other documents as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse payments and finalize instructions
- Offer advice - the escrow holder must stay at a fair, third-party status
- Give insight about future tax estimations
Mortgage Escrow Account
A Mortgage Escrow Account is established to make payments for on-going fees while there is a loan on the house. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.
Once you have the basics of the escrow process down, you can be a better buyer.