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Completing the Transaction

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Let's talk about "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 money exchanging part of closing goes smoothly. A place is said to be in escrow when in the closing process, funds is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the transaction is taking place. PayPal is a simple way to think of an escrow company.

The escrow agent makes sure that all terms and conditions of the seller's and buyer's contract are reached prior to the sale being finalized. This includes getting funds and records, signing required forms, and getting the release documents for any loans or liens that have been paid with the transaction, assuring you have a clear title to your house before the final price is fully paid.

The certificates the escrow agent may collect include:

  • 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
  • Terms of sale and any seller-assisted financing

Upon finishing of all portions of the escrow, closing can take place. All debts and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then transferred to you as now current homeowner and appropriate title insurance is issued as outlined in the escrow instructions.

The escrow holder receives a payment when the closing is complete. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Prepare escrow instructions
  • Perform a title search
  • Comply with lender's requirements as outlined in the escrow agreement
  • Accept payments from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are met
  • Disburse payments and finalize instructions

The Escrow Holder Will Not:

  • Advise you - the escrow company must maintain a neutral, third-party status
  • Give insight about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Request title search
  • Comply with lender's requirements as outlined in the escrow agreement
  • Accept funds from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • 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 finalize instructions
  • Offer advice - the escrow agent has to remain an impartial, third-party status
  • Offer 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. 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 ABCs of the escrow process down, you can be a better buyer.

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