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What is Escrow?

 Berkshire Hathaway Home Services PenFed Realty can walk you through closing - 410-647-8000 ext. 817
Escrow: An escrow company is hired to assure your home closes on time and the process goes smoothly. 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 when the exchange of money takes place. A simple way to understand the concept of what an escrow company does is to think of how you might use PayPal for Internet purchases.

The escrow agent makes sure that the terms and conditions of the agreement between the two parties are completed prior to the sale being finished.

The documents the escrow agent may collect 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

You're ready to close when all parts are finished in escrow process. All outstanding payments and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then receive the title to the property and the title insurance gets issued as outlined in the escrow instructions.

When closing is finished, you'll make a payment to the escrow agent. I'll keep you up-to-date on the procedure.

The Escrow Holder Will:

  • Write escrow instructions
  • Request title research
  • Comply with lender's requirements as noted in the escrow agreement
  • Receive payments from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse payments and finish instructions

The Escrow Holder Won't:

  • Tell you what's best - the escrow holder must maintain a neutral, third-party status
  • Give insight about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Petition title research
  • Comply with the bank's guidelines as specified in the escrow agreement
  • Intake payments from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are met
  • Disburse monies and finalize instructions
  • Give advice - the escrow holder must maintain a neutral, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

Now you know more about how to close on your future home. And, you can be a more informed home buyer and future homeowner.

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