Rules for Using an Escrow Company

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Let's talk about "escrow". An escrow agent is brought on to assure your house closes on time and the money exchanging part of closing goes smoothly. A house is said to be in escrow when in the closing transaction, money is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the transaction is taking place. For example, in an online auction, PayPal is the reliable third party that holds the buyer's payment, and then sends the payment to the seller.

The escrow holder makes sure that all terms and conditions of the seller's and buyer's agreement are completed 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 were paid with the transaction, assuring you have a clean title to your home before the final price is fully paid.

The records the escrow company may collect 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

Upon completion of all portions of the escrow, closing can take place. All debts and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then obtain the title to the home and the title insurance gets dispersed as stated in the escrow instructions.

At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Write escrow guidelines
Perform a title search
Comply with the bank's standards as outlined in the escrow agreement
Intake funds from the buyer
Prorate interest, insurance, tax and other payments according to instructions
Record deeds and other 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

The Escrow Holder Won't:

Advise you - the escrow agent must stay at a fair, third-party status
Give insight about the outcome of your taxes

The Escrow Holder Will:		The Escrow Holder Won't:
Assemble escrow instructions Request title inquiry Comply with lender's standards as noted in the escrow agreement Receive payments from the buyer Prorate interest, insurance, tax and other payments according to instructions Record deeds and other paperwork as instructed Obtain title insurance policy Close escrow when all instructions of seller and buyer have been finished Disburse payments and finish instructions		Give advice - the escrow agent has to remain an impartial, third-party status Dispense opinions about future tax estimations

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Once you're at ease with the escrow process, you can be a better buyer.

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