Rules for Using an Escrow Company

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Escrow 101

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Escrow: An escrow company is hired to assure your property closes on time and the process goes smoothly. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an Internet auction, PayPal is the neutral third party that holds the buyer's money, and then disburses the funds to the seller.

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

These are the legal forms 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

You're ready to close when every step is finished in escrow process. At this time, all payments and fees for inspections, title insurance and real estate commissions are taken. You'll then obtain the title to the home and the title insurance gets dispersed as noted in the escrow instructions.

When closing is in it's last step, you'll submit a payment to the escrow company. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Write escrow guidelines
Request title inquiry
Comply with the bank's guidelines 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 paperwork as instructed
Obtain title insurance policy
Close escrow when all instructions of seller and buyer have been finished
Disburse monies and finalize instructions

The Escrow Holder Won't:

Offer advice - the escrow agent stays a neutral, third-party status
Give insight about the outcome of your taxes

The Escrow Holder Will:		The Escrow Holder Won't:
Write escrow guidelines Perform a title search Meet the bank's requirements as outlined 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 met Disburse payments and finish instructions		Tell you what's best - the escrow company must stay at a fair, third-party status Offer opinions about the outcome of your taxes

Mortgage Escrow Account

A Mortgage Escrow Account is used to pay rolling expenses while there is a loan on the house. 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 easy to understand guide about the escrow process. Your specific methods might vary based on your bank and your escrow agent.

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