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What is Escrow?
First, a little about "escrow". To finalize the sale of a place, a neutral, third party (the escrow holder) is engaged to assure the transaction will close correctly and on time.
Escrow agents hold money for "safe-keeping" in an exchange between a buyer and seller.
For example, in an online transaction, PayPal is the reliable third party that holds the buyer's payment, and then hands over the money to the seller.
The escrow company makes sure that the terms and conditions of the agreement between the seller and buyer are reached in preparation of the sale being completed.
The documents the escrow agent 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
Closing on the home takes place when all of the procedures of the escrow are finished.
All expenses like title insurance, inspections and real estate commissions are paid.
You'll then secure the title to the home and the title insurance gets issued as agreed upon in the escrow instructions.
At the close of escrow, payments of funds are made in an acceptable form to the escrow.
You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow guidelines
- Request title research
- Comply with lender's standards as written in the escrow agreement
- Receive funds from the buyer
- Prorate insurance, tax, interest and other payments 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 finished
- Disburse monies and finalize instructions
- Offer advice - the escrow agent stays at an impartial, third-party status
- Give insight about future tax estimations
Mortgage Escrow Account
A Mortgage Escrow Account is started to pay on-going fees while there is a loan on the house.
Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.
Now you know more about how to close on your future home. And, you can be a smarter home buyer and future homeowner.
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