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How Escrow Works

Posted by admin on October 17, 2015
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An escrow holder is used to assure your home closes on time and the closing process goes smoothly. When funds are held by a third party in a transaction between a buyer and a seller, it’s in escrow. PayPal is a good example of an escrow company.
Settling the last details like taking in funds, finishing forms, getting the documents for loans and liens, and making sure you get a clean title to the home prior to your purchase gets finalized are all part of the job of the escrow holder.
The certificates the escrow holder may secure 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
You’re ready to close when every step is done in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. You’ll then receive the title to the house and the title insurance gets dispersed as noted in the escrow instructions.
When closing is completely finished, you’ll pay the fees to the escrow holder. You’ll know when it’s time to submit the form of payment.


The Escrow Holder Will:
The Escrow Holder Won’t:
  • Assemble escrow instructions
  • Request title research
  • Comply with the bank’s standards as outlined 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 have been met
  • Disburse payments and finalize instructions
  • Offer advice – the escrow agent stays a neutral, third-party status
  • Dispense opinions 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 plan will vary based on your lender and your escrow holder.



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