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Buying Your Next Property: Closing
Escrow: A neutral, third party (known as the escrow holder or the escrow agent) is used to assure your home closes on time and the transaction goes smoothly. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an Internet transaction, PayPal is the neutral third party that obtains the buyer's money, and then hands over the payment to the seller.
Clearing the final hurdles like obtaining funds, completing forms, securing the documents for loans and liens, and assuring you get a spotless title to the home before your purchase gets finalized are all parts of closing in which an escrow holder is useful.
These are the records that escrow agents usually look for:
- 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
- Tax statements
- Fire and other insurance policies
Closing on the house takes place when all of the procedures of the escrow are complete. All expenses like title insurance, inspections and real estate commissions are paid. Title to the home is then transferred to you as new owner and appropriate title insurance is issued as outlined in the escrow instructions.
When closing is finished, you'll pay the fees to the escrow agent. I'll keep you updated on the next steps.
The Escrow Holder Will:
- Prepare escrow instructions
- Request title search
- Meet lender's standards as noted in the escrow agreement
- Receive payments from the buyer
- Prorate insurance, tax, interest and other payments according to guidelines
- Record deeds and other legal documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been finished
- Disburse payments and finalize instructions
The Escrow Holder Won't:
- Tell you what's best - the escrow agent has to remain an impartial, third-party status
- Offer opinions about future tax estimations
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The Escrow Holder Will:
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The Escrow Holder Won't:
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- Prepare escrow instructions
- Request title inquiry
- Comply with lender'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 legal documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse payments and finish instructions
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- Give advice - the escrow agent must maintain a neutral, third-party status
- Offer opinions about the outcome of your taxes
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Mortgage Escrow Account
A Mortgage Escrow Account is started to pay recurring expenses while there is a loan on the house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
This is a simple outline of the escrow process. Your particular methods could be slightly different based on your bank and your escrow holder.