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What is Escrow?

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Let's talk about "escrow". When you're closing on your new house, an escrow agent is used to guarantee the process will close properly and in a specific time frame. Escrow holders hold money for "safe-keeping" in transactions between a buyer and seller. For example, in a Web purchase, PayPal is the neutral third party that holds the buyer's payment, and then disburses the money to the seller.

The escrow company makes sure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being finished. This includes getting payments and certificates, completing required forms, and seeking out the release documents for any loans or liens that have been paid off with the transaction, assuring you have a clear title to your property before the agreed upon price is fully paid.

The records the escrow holder may collect 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 house takes place when all of the procedures of the escrow are complete. All debts and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then receive the title to the property and the title insurance gets dispersed as outlined in the escrow instructions.

At the close of escrow, payments of funds are made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Request title search
  • Meet the bank's standards as outlined in the escrow agreement
  • Accept payments from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • 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 finish instructions
  • Tell you what's best - the escrow agent stays at an impartial, third-party status
  • Offer opinions about future tax estimations

Mortgage Escrow Account

A Mortgage Escrow Account is started to pay recurring fees while there is a loan on the house. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

 

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