Rules for Using an Escrow Company

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Completing the Transaction

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First, a little about "escrow". An escrow company is used to assure your home closes on time and the closing process goes smoothly. Escrow companies hold money for "safe-keeping" in transactions between a buyer and seller. For example, in an Internet transaction, PayPal is the secure third party that obtains the buyer's funds, and then sends the money to the seller.

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

Escrow agents compile the following records:

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 finishing of all instructions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. Title to the home is then given to you as new homeowner and appropriate title insurance is issued as noted in the escrow policy.

When closing is done, you'll submit a payment to the escrow holder. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Write escrow guidelines
Petition title research
Meet lender's requirements as noted in the escrow agreement
Accept funds from the buyer
Prorate tax, interest, insurance and other fees according to guidelines
Record deeds and other documents as instructed
Request title insurance policy
Close escrow when all instructions of seller and buyer are complete
Disburse funds and finish instructions

The Escrow Holder Won't:

Advise you - the escrow company 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:
Prepare escrow guidelines Perform a title search Meet the bank's standards as outlined in the escrow agreement Receive funds from the buyer Prorate insurance, tax, interest and other payments according to guidelines Record deeds and other documents as instructed Obtain title insurance policy Close escrow when all instructions of seller and buyer have been finished Disburse monies and finish instructions		Give advice - the escrow company must stay at a fair, third-party status Offer opinions about future tax estimations

Mortgage Escrow Account

A Mortgage Escrow Account is used to pay recurring fees while there is a loan on the house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

This is a quick run-down of the escrow process. Your individual process might vary based on your bank and your escrow holder.

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