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What is Escrow?
Escrow: An escrow agent is hired to assure your property closes on time and the money exchanging part of closing goes smoothly. Escrow holders hold money for "safe-keeping" in a deal between a buyer and seller. For example, in an Internet purchase, PayPal is the neutral third party that obtains the buyer's money, and then hands over the funds to the seller.
Tying up any loose ends like receiving funds, signing forms, getting the documents for loans and liens, and making sure you get a clean title to the house in preparation of your purchase gets finalized are all parts of closing in which an escrow holder is useful.
These are the documents that escrow holders usually compile:
- Loan documents
- Tax statements
- 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
Upon finishing of all instructions of the escrow, closing can take place. All payments owed and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then receive the title to the house and the title insurance gets dispersed as noted in the escrow instructions.
The escrow holder receives a payment at the completion of closing. You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow guidelines
- Petition title research
- Comply with the bank's guidelines as specified in the escrow agreement
- Accept payments from the buyer
- Prorate tax, interest, insurance and other fees according to instructions
- Record deeds and other documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer have been finished
- Disburse funds and finalize instructions
- Tell you what's best - the escrow company stays at an impartial, third-party status
- Dispense opinions about future tax estimations
Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.
Now you know more about being in escrow. And, you can be a more confident home buyer and future homeowner.