Escrow: To finish the sale of a place, a neutral, third party (the escrow holder) is brought into the picture to assure the process will close correctly and on time. A property is said to be in escrow when in the closing transaction, payment is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. An easy way to understand what an escrow company does is to think of the use of PayPal for Internet purchases.
The escrow agent makes sure that all terms and conditions of the seller's and buyer's agreement are met prior to the sale being finished. This includes getting funds and documents, completing required forms, and getting the release documents for any loans or liens that are to be paid with the transaction, assuring you have a free title to your home before the agreed upon price is fully paid.
Escrow holders want to obtain the following pieces of paperwork:
- 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 the steps of the escrow are complete. All payments owed and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then secure the title to the property and the title insurance gets issued as agreed upon in the escrow instructions.
At the close of escrow, fees are paid in an acceptable form to the escrow. As your real estate professional, I'll inform you of the acceptable way of paying.