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Escrow 101

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Let's talk about "escrow". When you're closing on your new place, an escrow holder is used to make sure the process will close properly and on time. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a good way to picture an escrow company.

Clearing the final hurdles like obtaining funds, signing forms, securing the documents for loans and liens, and assuring you get a clear title to the property prior to your purchase gets finalized are all part of the job of the escrow company.

These are the documents that escrow agents usually compile:

  • 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 fees for inspections, title insurance and real estate commissions are taken. You'll then secure the title to the house and the title insurance gets issued as agreed upon in the escrow instructions.

At the close of escrow, in an acceptable form to the escrow. I'll keep you informed on the next steps.

The Escrow Holder Will:

  • Write escrow guidelines
  • Request title research
  • Meet lender's requirements as written in the escrow agreement
  • Accept funds from the buyer
  • Prorate interest, insurance, tax 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 finish instructions

The Escrow Holder Will Not:

  • Advise you - the escrow holder stays a neutral, third-party status
  • Offer opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow instructions
  • Perform a title search
  • Comply with lender's standards as outlined in the escrow agreement
  • Intake funds 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 instructions of seller and buyer have been met
  • Disburse monies and finish instructions
  • Give advice - the escrow company must stay at a fair, third-party status
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Once you have the ABCs of the escrow process down, you can be a more assured buyer.

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