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The House is Almost Yours
Escrow: To close the sale of a home, a neutral, third party (the escrow company) is brought into the picture to assure the process will close perfectly and on time. A home is said to be in escrow when in the closing transaction, money is held by a third party on behalf of two parties when the transaction is taking place. PayPal is a good example of an escrow company.
Clearing the final hurdles like receiving funds, signing forms, obtaining the documents for loans and liens, and assuring you get a spotless title to the house prior to your purchase gets finalized are all parts of closing in which an escrow holder is useful.
The documents the escrow holder may collect include:
- 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
- Tax statements
Closing on the home takes place when all of the procedures of the escrow are finished. At this time, all payments and fees for inspections, title insurance and real estate commissions are taken. The house's title goes to you and title insurance begins per the policies of your particular escrow agreement.
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:
- Write escrow guidelines
- Perform a title inquiry
- Comply with lender's standards as specified in the escrow agreement
- Intake payments from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse monies and finish instructions
The Escrow Holder Won't:
- Give advice - the escrow company stays at an impartial, third-party status
- Dispense opinions about tax implications
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The Escrow Holder Will:
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The Escrow Holder Won't:
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- Prepare escrow instructions
- Perform a title inquiry
- Comply with the bank's requirements as outlined in the escrow agreement
- Receive payments from the buyer
- Prorate tax, interest, insurance and other fees according to instructions
- Record deeds and other documents as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been finished
- Disburse monies and finish instructions
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- Tell you what's best - the escrow agent stays at an impartial, third-party status
- Give insight about future tax estimations
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Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. 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 quick run-down of the escrow process. Your individual process may be slightly different depending on your bank and your escrow company.