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Escrow 101

 Berkshire Hathaway Home Services PenFed Realty can walk you through closing - 410-647-8000 ext. 817
Escrow: When you're closing on your new place, a neutral, third party (known as the escrow holder or the escrow agent) is used to make certain the process will close appropriately and in a specific time frame. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in a Web transaction, PayPal is the neutral third party that obtains the buyer's payment, and then disburses the payment to the seller.

The escrow agent is careful to assure that all terms and conditions of the seller's and buyer's negotiated agreement are completed prior to the sale being completed. This includes receiving monies and paperwork, finishing required forms, and getting the release documents for any loans or liens that are to be paid off with the transaction, assuring you have a clean title to your house before the purchase price is fully paid.

These are the documents that escrow companies usually look for:

  • 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

You're ready to close when every step is done in escrow process. At this time, all payments and fees for inspections, title insurance and real estate commissions are paid out. You'll then receive the title to the home and the title insurance gets issued as outlined in the escrow instructions.

When closing is completely finished, you'll pay the fees to the escrow company. I'll keep you informed on the next steps.

The Escrow Holder Will:

  • Assemble escrow guidelines
  • Perform a title search
  • Comply with lender's guidelines as specified in the escrow agreement
  • Accept funds 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 terms of agreement of seller and buyer are met
  • Disburse funds and finish instructions

The Escrow Holder Won't:

  • Tell you what's best - the escrow agent must maintain a neutral, third-party status
  • Offer opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Petition title inquiry
  • Comply with the bank's guidelines as specified in the escrow agreement
  • Receive payments from the buyer
  • Prorate tax, interest, insurance and other fees according to instructions
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse payments and finish instructions
  • Offer advice - the escrow holder has to remain an impartial, third-party status
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

This is a simple outline of the escrow process. Your particular plan might be slightly different based on your lender and your escrow company.

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