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First, a little about "escrow". An escrow agent is used to assure your property closes on time and the money exchanging part of closing goes smoothly. 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 think of what an escrow company does is to compare it to PayPal for Internet purchases.

The escrow agent makes sure that the terms and conditions of the agreement between the sellers and the buyers are reached in preparation of the sale being finalized.

The documents the escrow company may obtain include:

  • 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 the steps of the escrow are complete. At this time, all payments and dues for inspections, title insurance and real estate commissions are taken. You'll then obtain the title to the house and the title insurance gets dispersed as noted in the escrow instructions.

When closing is completed, you'll submit a payment to the escrow agent. As your real estate agent, I'll let you know what is an acceptable way of paying.

The Escrow Holder Will:

  • Write escrow instructions
  • Perform a title search
  • Comply with lender's requirements as specified in the escrow agreement
  • Intake funds from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been met
  • Disburse payments and finish instructions

The Escrow Holder Won't:

  • Give advice - the escrow agent stays a neutral, third-party status
  • Offer opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow guidelines
  • Perform a title inquiry
  • Meet the bank's standards as specified in the escrow agreement
  • Receive funds from the buyer
  • Prorate tax, interest, insurance and other fees 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 funds and finalize instructions
  • Give advice - the escrow company 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. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.

Now you know more about being in escrow. And, you can be a better informed home buyer and future homeowner.

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