Buying a home? What is escrow?

Escrow Transaction

Closing Escrow (Recording the Deed)

Escrow
To finalize the sale of the home a neutral, third party (the escrow company) is engaged to assure the transaction will close properly and on time. The escrow company ensures that all terms and conditions of the seller’s and buyer’s agreement are met prior to the sale being finalized, including receiving funds and documents, completing required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you clear title to your property before the purchase price is fully paid.

The documentation the escrow company may   be collecting includes:

  • Loan documents
  • 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

Upon completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then transferred to the seller and appropriate title insurance is issued as outlined in the escrow instructions.

At the close of escrow, payment of funds shall be made in an acceptable form to the escrow.

Escrow   Company Will:

Escrow   Company Won’t:

  • Prepare escrow instructions
  • Request title search
  • Comply with lender’s requirements as specified in the escrow        agreement
  • Receive funds from the buyer
  • Prorate insurance, tax, interest and other payments according to        instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been        met
  • Disburse funds and finalize instructions
  • Give advice – the escrow holder must maintain neutral,        third-party status
  • Offer opinions about tax implications

Impound Account

A Mortgage Escrow Account also known as an Impound Account is established to pay ongoing expenses while there is a loan on the house. These expenses include property taxes and home insurance. The Escrow Account is partially funded at closing and the home buyer makes continuing contributions through their monthly mortgage payment.