What to Expect When You're in Escrow

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What is Escrow?

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First, a little about "escrow". An escrow holder is hired to assure your place closes on time and the transaction goes smoothly. A place is said to be in escrow when in the closing process, money is held by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. For example, in a Web transaction, PayPal is the neutral third party that holds the buyer's funds, and then hands over the payment to the seller.

The escrow holder insures that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being finalized. This includes receiving payments and records, signing required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you have a free title to your house before the agreed upon price is fully paid.

Escrow agents look for the following legal documents:

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
Terms of sale and any seller-assisted financing

You're ready to close when all steps are complete in escrow process. All debts and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then given to you as now current homeowner and correct title insurance is issued as noted in the escrow instructions.

The escrow holder gets a payment when the closing is complete. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Prepare escrow instructions
Perform a title inquiry
Meet the bank's standards as specified in the escrow agreement
Intake payments from the buyer
Prorate tax, interest, insurance and other fees according to guidelines
Record deeds and other paperwork as instructed
Obtain title insurance policy
Close escrow when all instructions of seller and buyer have been met
Disburse monies and finalize instructions

The Escrow Holder Will Not:

Give advice - the escrow holder must stay at a fair, third-party status
Give insight about future tax estimations

The Escrow Holder Will:		The Escrow Holder Won't:
Prepare escrow guidelines Petition title research Meet the bank's requirements as specified in the escrow agreement Intake payments from the buyer Prorate interest, insurance, tax and other payments according to instructions Record deeds and other paperwork as instructed Request title insurance policy Close escrow when all instructions of seller and buyer have been finished Disburse payments and finalize instructions		Advise you - the escrow company must maintain a neutral, third-party status Give insight about future tax estimations

Mortgage Escrow Account

A Mortgage Escrow Account is started to make payments for rolling fees while there is a loan on the house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

Once you have the ABCs of the escrow process down, you can be a more assured buyer.

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