Let's talk about "escrow". When you're closing on your new house, a neutral, third party (known as the escrow holder or the escrow agent) is used to make sure the process will close without problems and in a timely manner. A house is said to be in escrow when in the closing process, money is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. For example, in an online auction, PayPal is the neutral third party that obtains the buyer's payment, and then disburses the funds to the seller.
Clearing the final hurdles like obtaining funds, completing forms, getting the documents for loans and liens, and assuring you get a spotless title to the home prior to your purchase gets finalized are all parts of closing in which an escrow holder is useful.
These are the legal forms that escrow holders usually look to collect:
- 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 portions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then secure the title to the home and the title insurance gets issued as outlined in the escrow instructions.
At the close of escrow, in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.