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First-Time Home Buying: Closing
Let's talk about "escrow". To complete the sale of a home, a neutral, third party (the escrow agent) is employed to assure the process will close perfectly and on time.
A house is said to be in escrow when in the closing transaction, money is held by a third party on behalf of two parties when the exchange of money takes place.
An everyday way to think of what an escrow company does is to think of the use of PayPal for online purchases.
The escrow agent makes sure that the terms and conditions of the agreement between the two parties are completed prior to the sale being completed.
The certificates the escrow company may secure 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 finished in escrow process.
All payments owed and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions).
You'll then receive the title to the home and the title insurance gets issued as stated in the escrow instructions.
At the close of escrow, in an acceptable form to the escrow.
As your real estate professional, I'll let you know what is an acceptable way of paying.
The Escrow Holder Will:
The Escrow Holder Won't:
- Prepare escrow guidelines
- Petition title search
- Comply with the bank's requirements as written in the escrow agreement
- Accept funds from the buyer
- Prorate tax, interest, insurance and other fees 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 payments and finish instructions
- Tell you what's best - the escrow agent has to remain an impartial, third-party status
- Give insight 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.
Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
This is a simple outline of the escrow process. Your individual process could be unique depending on your bank and your escrow holder.