Don't let inexperience with the real estate industry scare you from becoming a homeowner. I can help you understand the process. E-mail me at
karl@multizonerealty.com .
First-Time Home Buying: How To Close on a House
Let's talk about "escrow". When you're closing on your new house, an escrow agent is used to make certain the process will close properly and on time. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. A simple way to understand what an escrow company does is to think of how you might use PayPal for Internet purchases.
The escrow holder insures that all terms and conditions of the seller's and buyer's agreement are completed prior to the sale being finalized. This includes getting monies and paperwork, signing required forms, and seeking out the release documents for any loans or liens that have been paid with the transaction, assuring you have a free title to your property before the asking price is fully paid.
Escrow companies compile the following legal documents:
- 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
Closing on the property takes place when all of the procedures of the escrow are complete. At this time, all payments and dues for inspections, title insurance and real estate commissions are paid out. Title to the property is then transferred to you as new homeowner and related title insurance is issued as outlined in the escrow instructions.
The escrow company gets a payment at the completion of closing. As your real estate professional, I'll let you know what is an acceptable form of payment.
The Escrow Holder Will:
- Assemble escrow instructions
- Petition title inquiry
- Meet the bank's requirements as written 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
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse payments and finish instructions
The Escrow Holder Will Not:
- Offer advice - the escrow holder must maintain a neutral, third-party status
- Give insight 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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- Prepare escrow guidelines
- Perform a title inquiry
- Comply with the bank's standards as noted in the escrow agreement
- Accept payments from the buyer
- Prorate interest, insurance, tax and other payments according to instructions
- Record deeds and other paperwork as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse monies and finalize instructions
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- Advise you - the escrow company stays at an impartial, third-party status
- Dispense opinions about the outcome of your taxes
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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.
Once you're at ease with the escrow process, you can be a more assured buyer.