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Escrow 101

 Mark Malave can walk you through closing - (773) 938-2585
Escrow: To complete the sale of a home, a neutral, third party (the escrow holder) is employed to assure the transaction will close perfectly and on time. A home is said to be in escrow when in the closing transaction, payment is secured by a third party on behalf of two parties when the exchange of money takes place. For example, in an Internet purchase, PayPal is the neutral third party that obtains the buyer's money, and then hands over the money to the seller.

The escrow company makes sure that the terms and conditions of the agreement between the seller and buyer are reached in preparation of the sale being finalized.

The certificates the escrow agent may obtain include:

  • 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

You're ready to close when all parts are finished in escrow process. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. You'll then receive the title to the home and the title insurance gets issued as agreed upon in the escrow instructions.

When closing is completely finished, you'll submit a payment to the escrow company. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Assemble escrow guidelines
  • Perform a title search
  • Comply with the bank's requirements as outlined in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other legal documents as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer have been met
  • Disburse payments and finish instructions

The Escrow Holder Won't:

  • Give advice - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Request title search
  • Comply with lender's guidelines as outlined in the escrow agreement
  • Accept payments 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 terms of agreement of seller and buyer are met
  • Disburse monies and finalize instructions
  • Give advice - the escrow holder stays at an impartial, third-party status
  • Give insight 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. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

This is a simple outline of the escrow process. Your individual plan could vary based on your lender and your escrow company.

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