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Steps to Closing on a Home
First, a little about "escrow". To close the sale of a property, a neutral, third party (the escrow company) is employed to assure the transaction will close appropriately and on time. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a simple way to think of an escrow company.
The escrow company is careful to assure that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being completed. This includes securing funds and documents, filling out required forms, and seeking out the release documents for any loans or liens that are to be cleared with the transaction, assuring you have a clear title to your property before the purchase price is fully paid.
The certificates the escrow company may obtain include:
- 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
- Loan documents
Upon completion of all instructions of the escrow, closing can take place. All payments owed and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the house is then transferred to you as buyer and related title insurance is issued as noted in the escrow instructions.
The escrow company receives 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
- Perform a title research
- Comply with lender's requirements as outlined in the escrow agreement
- Receive payments from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse payments and finalize instructions
The Escrow Holder Won't:
- Advise you - the escrow agent must maintain a neutral, third-party status
- Offer opinions about tax implications
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The Escrow Holder Will:
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The Escrow Holder Won't:
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- Prepare escrow guidelines
- Request title search
- Meet the bank's standards as noted in the escrow agreement
- Receive funds from the buyer
- Prorate interest, insurance, tax 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 have been met
- Disburse monies and finish instructions
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- Tell you what's best - the escrow company must maintain a neutral, third-party status
- Give insight about future tax estimations
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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 comfortable with the escrow process, you can be a informed buyer.