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Steps to Closing on a Property
Escrow: When you're closing on your new house, an escrow company is used to make sure the transaction will close without problems and in a specific time frame. 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 agent makes sure that all terms and conditions of the seller's and buyer's negotiated agreement are completed prior to the sale being finished. This includes receiving funds and documents, filling out required forms, and seeking out the release documents for any loans or liens that were paid off with the transaction, assuring you have a clear title to your home before the asking price is fully paid.
The records the escrow holder may secure include:
- 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
- Loan documents
You're ready to close when all steps are finished in escrow process. All payments owed and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then get the title to the property and the title insurance gets issued as noted in the escrow instructions.
At the close of escrow, fees are paid in an acceptable form to the escrow. I'll keep you up-to-date on what comes next.
The Escrow Holder Will:
- Assemble escrow instructions
- Request title research
- Meet the bank's standards as noted in the escrow agreement
- Receive funds from the buyer
- Prorate interest, insurance, tax 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 are met
- Disburse funds and finish instructions
The Escrow Holder Won't:
- Offer advice - the escrow company must stay at a fair, third-party status
- Offer opinions 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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- Assemble escrow guidelines
- Request title research
- Meet lender's requirements as written in the escrow agreement
- Intake funds from the buyer
- Prorate interest, insurance, tax and other payments according to guidelines
- Record deeds and other paperwork as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse monies and finalize instructions
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- Offer advice - the escrow agent stays a neutral, third-party status
- Dispense opinions about tax implications
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Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
This is a simple outline of the escrow process. Your individual process might be different depending on your bank and your escrow agent.