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Escrow 101

 RE/MAX  Full Spectrum - Roxanne Mercer can walk you through closing - (707) 869-9067
First, a little about "escrow". To close the sale of a place, a neutral, third party (the escrow holder) is employed to assure the transaction will close appropriately 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 simple way to think of an escrow company.

Tying up any loose ends like obtaining funds, completing forms, obtaining the documents for loans and liens, and assuring you get a clean title to the house before your purchase gets finalized are all part of the job of the escrow agent.

These are the legal forms that escrow companies usually look to collect:

  • 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 each step of the finished in escrow process. All payments owed and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then obtain the title to the property and the title insurance gets issued as noted in the escrow instructions.

When closing is finished, you'll submit a payment to the escrow holder. I'll keep you updated on what comes next.

The Escrow Holder Will:

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

The Escrow Holder Won't:

  • Give advice - the escrow company must maintain a neutral, third-party status
  • Offer opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow instructions
  • Request title inquiry
  • Comply with lender's guidelines as written in the escrow agreement
  • Intake payments from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other documents as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse monies and finish instructions
  • Offer advice - the escrow holder must maintain a neutral, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is used to pay recurring expenses while there is a loan on the house. 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 how to close on your future home. And, you can be a more informed home buyer and future homeowner.

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