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Steps to Closing on a Property

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Escrow: To close the sale of a home, a neutral, third party (the escrow company) is brought into the picture to assure the transaction will close properly and on time. Escrow companies hold money for "safe-keeping" in a deal between a buyer and seller. An easy way to understand the concept of what an escrow company does is to think of how you might use PayPal for Internet purchases.

The escrow holder insures that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being finished. This includes securing payments and documents, signing required forms, and seeking out the release documents for any loans or liens that are to be cleared with the transaction, assuring you have a clear title to your property before the purchase price is fully paid.

These are the documents that escrow companies usually look for:

  • 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

Upon finishing of all instructions of the escrow, closing can take place. 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 property and the title insurance gets issued as agreed upon in the escrow instructions.

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

The Escrow Holder Will:

  • Write escrow instructions
  • Request title research
  • Meet the bank's requirements as specified in the escrow agreement
  • Intake funds from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other documents as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse payments and finish instructions

The Escrow Holder Won't:

  • Offer advice - the escrow holder must stay at a fair, third-party status
  • Offer opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow instructions
  • Request title search
  • Meet lender's requirements as written in the escrow agreement
  • Receive funds from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse funds and finish instructions
  • Offer advice - the escrow agent stays a neutral, 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. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

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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