What to Expect When You're in Escrow

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Buying Your Next Property: Closing

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Escrow: To complete the sale of a place, a neutral, third party (the escrow company) is engaged to assure the transaction will close properly and on time. Escrow companies hold money for "safe-keeping" in an exchange between a buyer and seller. An easy way to understand what an escrow company does is to compare it to PayPal for online purchases.

The escrow holder makes sure that all terms and conditions of the seller's and buyer's agreement are completed prior to the sale being completed. This includes getting funds and certificates, signing required forms, and obtaining the release documents for any loans or liens that have been paid with the transaction, assuring you have a clean title to your house before the purchase price is fully paid.

These are the legal forms that escrow companies usually look to collect:

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

Upon finishing of all instructions of the escrow, closing can take place. At this time, all payments and fees for inspections, title insurance and real estate commissions are collected. The property's title goes to you and title insurance is issued 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. I'll keep you informed on the next steps.

The Escrow Holder Will:

Write escrow guidelines
Petition title search
Meet the bank's standards as written in the escrow agreement
Receive payments from the buyer
Prorate tax, interest, insurance and other fees 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 finished
Disburse funds and finalize instructions

The Escrow Holder Will Not:

Offer advice - the escrow agent stays at an impartial, third-party status
Give insight about tax implications

The Escrow Holder Will:		The Escrow Holder Won't:
Write escrow instructions Perform a title search Comply with lender's requirements as outlined in the escrow agreement Receive funds from the buyer Prorate interest, insurance, tax and other payments 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 funds and finalize instructions		Give advice - the escrow agent has to remain an impartial, third-party status Dispense opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is started to pay rolling fees while there is a loan on the 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.

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

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