Whether it's your first property or your next property, I'll walk you through the process. E-mail me at
karl@multizonerealty.com to get some free information.
What is Escrow?
First, a little about "escrow". To finalize the sale of a house, a neutral, third party (the escrow agent) is employed to assure the process will close properly and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. An everyday way to understand what an escrow company does is to think of the use of PayPal for online purchases.
Clearing the final hurdles like receiving funds, signing forms, obtaining the documents for loans and liens, and making sure you get a clean title to the home before your purchase gets finalized are all parts of closing in which an escrow holder is useful.
The records the escrow agent may collect include:
- 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
- Terms of sale and any seller-assisted financing
Upon finishing of all portions of the escrow, closing can take place. At this time, all payments and fees for inspections, title insurance and real estate commissions are collected. The property's title is given to you and title insurance begins per the policies of your particular escrow process.
At the close of escrow, fees are paid in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
- Write escrow guidelines
- Request title search
- Meet lender's standards as noted in the escrow agreement
- Intake payments from the buyer
- Prorate tax, interest, insurance and other fees according to guidelines
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been met
- Disburse funds and finalize instructions
The Escrow Holder Won't:
- Tell you what's best - the escrow company stays a neutral, third-party status
- Dispense opinions about future tax estimations
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The Escrow Holder Will:
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The Escrow Holder Won't:
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- Write escrow guidelines
- Petition title research
- Comply with the bank's standards 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 legal documents as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse funds and finalize instructions
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- Advise you - the escrow holder must maintain a neutral, third-party status
- Dispense opinions about tax implications
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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. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.
Now you know more about being in escrow. And, you can be a smarter home buyer and future homeowner.