First, a little about "escrow". To close the sale of a house, a neutral, third party (the escrow company) is engaged to assure the transaction will close correctly and on time. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an online auction, PayPal is the secure third party that obtains the buyer's cash, and then hands over the money to the seller.
Tying up any loose ends like receiving funds, finishing forms, obtaining the documents for loans and liens, and assuring you get a clear title to the property in preparation of your purchase gets finalized are all parts of closing in which an escrow holder is useful.
The documents the escrow company may collect 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
Upon completion of all instructions of the escrow, closing can take place. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. Title to the house is then given to you as buyer and appropriate title insurance is issued as outlined in the escrow instructions.
At the close of escrow, payments are submitted in an acceptable form to the escrow. As your real estate agent, I'll let you know what is an acceptable way of paying.