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Let's talk about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is hired to assure your house closes on time and the closing process goes smoothly. Escrow agents hold money for "safe-keeping" in transactions between a buyer and seller. For example, in a Web transaction, PayPal is the reliable third party that holds the buyer's payment, and then sends the payment to the seller.

The escrow agent makes sure that the terms and conditions of the agreement between the seller and buyer are completed prior to the sale being finished.

Escrow agents want to obtain the following pieces of paperwork:

  • 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
  • Title insurance policies

Upon finishing of all instructions of the escrow, closing can take place. At this time, all payments and fees for inspections, title insurance and real estate commissions are paid out. Title to the property is then transferred to you as new homeowner and appropriate title insurance is issued as outlined in the escrow policy.

The escrow company gets a payment at the completion of closing. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Prepare escrow instructions
  • Perform a title research
  • Comply with lender's guidelines as noted in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been met
  • Disburse payments and finalize instructions

The Escrow Holder Will Not:

  • Give advice - the escrow agent 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 guidelines
  • Perform a title research
  • Meet lender's standards as specified in the escrow agreement
  • Receive funds from the buyer
  • Prorate tax, interest, insurance and other fees according to instructions
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse monies and finish instructions
  • Tell you what's best - the escrow agent stays a neutral, third-party status
  • Give insight about the outcome of your taxes

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

This is a simple outline of the escrow process. Your specific methods will be slightly different depending on your bank and your escrow agent.

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