What to Expect When You're in Escrow

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First, a little about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is used to assure your property closes on time and the money exchanging part of closing goes smoothly. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. A simple way to understand what an escrow company does is to compare it to PayPal for Internet purchases.

The escrow agent makes sure that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being finalized. This includes securing monies and records, completing required forms, and getting the release documents for any loans or liens that are to be paid off with the transaction, assuring you have a clean title to your place before the agreed upon price is fully paid.

These are the records that escrow companies usually look for:

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

Upon finishing 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 paid out. You'll then receive the title to the property and the title insurance gets dispersed as noted in the escrow instructions.

The escrow holder gets a payment when the closing is complete. As your REALTOR, I'll inform you of the acceptable form of payment.

The Escrow Holder Will:

Prepare escrow guidelines
Request title inquiry
Meet the bank's guidelines as written in the escrow agreement
Receive payments from the buyer
Prorate insurance, tax, interest and other payments according to instructions
Record deeds and other paperwork as instructed
Obtain title insurance policy
Close escrow when all terms of agreement of seller and buyer are complete
Disburse payments and finalize instructions

The Escrow Holder Won't:

Advise you - the escrow company has to remain an impartial, third-party status
Dispense opinions about the outcome of your taxes

The Escrow Holder Will:		The Escrow Holder Won't:
Assemble escrow guidelines Perform a title inquiry Comply with the bank's guidelines as noted in the escrow agreement Receive payments from the buyer Prorate tax, interest, insurance and other fees according to guidelines Record deeds and other legal documents as instructed Request title insurance policy Close escrow when all instructions of seller and buyer are met Disburse payments and finalize instructions		Advise you - the escrow company must maintain a neutral, third-party status Give insight about the outcome of your taxes

Mortgage Escrow Account

A Mortgage Escrow Account is started to pay rolling fees while there is a loan on the house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Now you know more about being in escrow. And, you can be a more informed home buyer and future homeowner.

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