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Completing the Transaction

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Escrow: When you're closing on your new property, a neutral, third party (known as the escrow holder or the escrow agent) is used to guarantee the process will close appropriately and in a timely manner. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. An easy way to think of what an escrow company does is to think of how you might use PayPal for online purchases.

The escrow company makes sure that the terms and conditions of the agreement between the sellers and the buyers are reached prior to the sale being completed.

The records the escrow company may obtain include:

  • 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
  • Fire and other insurance policies
  • Title insurance policies

Upon completion of all portions of the escrow, closing can take place. All payments owed and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). The property's title is given to you and title insurance is issued per the policies of your particular escrow process.

The escrow holder gets 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 search
  • Meet the bank's requirements as noted in the escrow agreement
  • Intake funds from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse monies and finish instructions

The Escrow Holder Won't:

  • Give advice - the escrow holder must maintain a neutral, third-party status
  • Offer opinions about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow guidelines
  • Petition title search
  • Comply with the bank's requirements as specified in the escrow agreement
  • Intake payments from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other legal documents as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been met
  • Disburse payments and finalize instructions
  • Offer advice - the escrow agent has to remain an impartial, third-party status
  • Give insight about the outcome of your taxes

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.

This is a simple outline of the escrow process. Your specific process will be slightly different depending on your bank and your escrow agent.

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