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What is Escrow?

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Let's talk about "escrow". An escrow company is used to assure your property closes on time and the process goes smoothly. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in a Web auction, PayPal is the secure third party that holds the buyer's cash, and then disburses the payment to the seller.

Settling the last details like receiving funds, signing forms, getting the documents for loans and liens, and assuring you get a spotless title to the property in preparation of your purchase gets finalized are all parts of closing in which an escrow agent is useful.

These are the records that escrow holders usually look to collect:

Closing on the property happens when all of the procedures of the escrow are finished. At this time, all payments and fees for inspections, title insurance and real estate commissions are paid out. The property's title gets transferred to you and title insurance is issued per the policies of your particular escrow agreement.

The escrow agent gets a payment when the closing is complete. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Write escrow guidelines
  • Request title research
  • Comply with the bank's standards as specified in the escrow agreement
  • Receive funds 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 complete
  • Disburse funds and finish instructions

The Escrow Holder Won't:

  • Advise you - the escrow company has to remain an impartial, third-party status
  • Give insight about tax implications
The Escrow Holder Will:

The Escrow Holder Won't:
  • Assemble escrow instructions
  • Petition title research
  • Comply with lender's standards as outlined in the escrow agreement
  • Intake 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 are complete
  • Disburse funds and finalize instructions

  • Tell you what's best - the escrow company must stay at a fair, third-party status
  • Offer 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. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Once you're familiar with the escrow process, you can be a more assured buyer.

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