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Escrow 101

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Escrow: To finish the sale of a property, a neutral, third party (the escrow agent) is engaged to assure the transaction will close properly and on time. Escrow companies hold money for "safe-keeping" in transactions between a buyer and seller. An easy way to understand what an escrow company does is to think of the use of PayPal for Internet purchases.

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

Escrow agents compile the following legal documents:

  • 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 property takes place when the steps of the escrow are finished. All debts and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then secure the title to the property and the title insurance gets dispersed as outlined in the escrow instructions.

The escrow agent gets a payment when the closing is complete. As your REALTOR, I'll inform you of the acceptable form of payment.

The Escrow Holder Will:

  • Assemble escrow guidelines
  • Request title search
  • Comply with lender's guidelines 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 legal documents as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse monies and finalize instructions

The Escrow Holder Won't:

  • Give advice - the escrow holder stays at an impartial, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Perform a title research
  • Comply with the bank's requirements as specified in the escrow agreement
  • Accept payments from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other 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
  • Tell you what's best - the escrow holder has to remain an impartial, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

This is a quick run-down of the escrow process. Your specific methods could be different based on your lender and your escrow holder.

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