How Escrow Works
I’ll Champion for You Through Closing
Westside Realty can walk you through closing – 800-455-0277 – Let’s talk about “escrow”. When you’re closing on your new place, a neutral, third party (known as the escrow holder or the escrow agent) is used to make sure the transaction will close properly and in a timely manner. 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 online auction, PayPal is the secure third party that holds the buyer’s cash, and then hands over the funds to the seller.
The escrow company insures that all terms and conditions of the seller’s and buyer’s negotiated agreement are met prior to the sale being finalized. This includes getting funds and documents, signing required forms, and getting the release documents for any loans or liens that have been paid off with the transaction, assuring you have a free title to your place before the agreed upon price is fully paid.
The pieces of paperwork the escrow company may obtain 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
- You’re ready to close when every step is done in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. You’ll then receive the title to the property and the title insurance gets dispersed as outlined in the escrow instructions.
The escrow holder receives a payment at the completion of closing. You’ll know when it’s time to submit the form of payment.
The Escrow Holder Will:
- Write escrow guidelines
- Request title search
- Comply with the bank’s requirements as specified in the escrow agreement
- Accept funds from the buyer
- Prorate tax, interest, insurance and other fees according to guidelines
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been met
- Disburse monies and finish instructions
The Escrow Holder Won’t:
- Advise you – the escrow company stays a neutral, third-party status
- Dispense opinions about tax implications
- Mortgage Escrow Account
- Often, to pay recurring costs while there’s a loan on the house, a Mortgage Escrow Account is created. 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.
Now you know more about being in escrow. And, you can be a smarter home buyer and future homeowner.