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Escrow: To complete the sale of a property, a neutral, third party (the escrow agent) is employed to assure the process will close correctly and on time.
When money is held by a third party in a transaction between a buyer and a seller, it's in escrow.
An easy way to understand the concept of what an escrow company does is to think of how you might use PayPal for Internet purchases.
The escrow company makes sure that the terms and conditions of the agreement between the seller and buyer are reached prior to the sale being finalized.
These are the legal documents that escrow holders usually compile:
- 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
Closing on the home takes place when the steps of the escrow are finished.
At this time, all payments and dues for inspections, title insurance and real estate commissions are collected.
The house's title is given to you and title insurance begins per the steps of your individual escrow agreement.
At the close of escrow, fees are paid in an acceptable form to the escrow.
I'll keep you up-to-date on the procedure.
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The Escrow Holder Will: |
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The Escrow Holder Won't: |
- Prepare escrow instructions
- Perform a title search
- Meet lender's standards as noted in the escrow agreement
- Accept funds from the buyer
- Prorate tax, interest, insurance and other fees according to instructions
- Record deeds and other legal documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been met
- Disburse payments and finish instructions
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- Tell you what's best - the escrow company must stay at a fair, third-party status
- Dispense opinions about the outcome of your taxes
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Mortgage Escrow Account
A Mortgage Escrow Account is started to pay rolling fees while there is a loan on the house.
Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.
Now you know more about being in escrow. And, you can be a more informed home buyer and future homeowner.