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Escrow 101

 Berkshire Hathaway Home Services PenFed Realty can walk you through closing - 410-647-8000 ext. 817
Let's talk about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is hired to assure your home closes on time and the transaction goes smoothly. Escrow agents hold money for "safe-keeping" in an exchange between a buyer and seller. PayPal is a good way to picture an escrow company.

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 finalized. This includes getting funds and paperwork, filling out required forms, and seeking out the release documents for any loans or liens that have been paid off with the transaction, assuring you have a clear title to your property before the final price is fully paid.

These are the pieces of paperwork that escrow companies usually look to collect:

  • 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
  • Fire and other insurance policies

You're ready to close when each step of the done in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. Title to the home is then given to you as buyer and correct title insurance is issued as noted in the escrow instructions.

The escrow agent receives a payment at the completion of closing. As your real estate professional, I'll let you know what is an acceptable form of payment.

The Escrow Holder Will:

  • Assemble escrow instructions
  • Request title search
  • Meet the bank's guidelines as written in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been met
  • Disburse funds and finalize instructions

The Escrow Holder Won't:

  • Offer advice - the escrow company must maintain a neutral, third-party status
  • Offer opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow guidelines
  • Petition title inquiry
  • Meet lender's standards 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 documents as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are met
  • Disburse monies and finish instructions
  • Give advice - the escrow holder must maintain a neutral, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.

Once you have the rules of the escrow process down, you can be a informed buyer.

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