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Let's talk about "escrow". When you're closing on your new house, an escrow company is used to make certain the transaction will close properly and in a timely manner. Escrow agents hold money for "safe-keeping" in transactions between a buyer and seller. For example, in a Web auction, PayPal is the neutral third party that obtains the buyer's cash, and then hands over the funds to the seller.

The escrow holder makes sure that the terms and conditions of the agreement between the seller and buyer are performed in preparation of the sale being completed.

These are the legal documents that escrow holders usually compile:

  • 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

Closing on the home takes place when the steps of the escrow are done. At this time, all payments and dues for inspections, title insurance and real estate commissions are paid out. You'll then secure the title to the home and the title insurance gets dispersed as agreed upon in the escrow instructions.

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

The Escrow Holder Will:

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

The Escrow Holder Won't:

  • Give advice - the escrow agent must stay at a fair, third-party status
  • Give insight about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow guidelines
  • Petition title research
  • Meet the bank's requirements as written in the escrow agreement
  • Accept payments from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other paperwork as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse monies and finalize instructions
  • Give advice - the escrow holder has to remain an impartial, third-party status
  • Give insight about the outcome of your taxes

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. 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.

This is a simple outline of the escrow process. Your specific methods might be different depending on your bank and your escrow holder.

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Gloria Gatling, GRI-Broker/REALTOR®

PO Box 1136
Walkertown, NC 27051-1136