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Buying Your Next Property: Closing

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Escrow: When you're closing on your new house, a neutral, third party (known as the escrow holder or the escrow agent) is used to make sure the process will close properly and in a timely manner. A house is said to be in escrow when in the closing process, payment is secured by a third party on behalf of two parties when the exchange of money takes place. For example, in an Internet auction, PayPal is the secure third party that obtains the buyer's cash, and then hands over the funds to the seller.

The escrow holder makes sure that the terms and conditions of the agreement between the two parties are completed prior to the sale being finished.

The certificates the escrow agent may secure include:

  • 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
  • Title insurance policies

Closing on the home happens when all of the procedures of the escrow are complete. At this time, all payments and dues for inspections, title insurance and real estate commissions are taken. The home's title gets transferred to you and title insurance begins per the steps of your particular escrow agreement.

At the close of escrow, payments of funds are made in an acceptable form to the escrow. As your REALTOR, I'll inform you of the acceptable form of payment.

The Escrow Holder Will:

  • Write escrow guidelines
  • Petition title research
  • Comply with the bank's requirements as written in the escrow agreement
  • Receive funds from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse payments and finish instructions

The Escrow Holder Will Not:

  • Advise you - the escrow company must maintain a neutral, third-party status
  • Dispense opinions about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Petition title search
  • Meet the bank's guidelines as noted in the escrow agreement
  • Accept funds from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • Record deeds and other paperwork as instructed
  • Request title insurance policy
  • Close escrow when all terms of agreement of seller and buyer have been finished
  • Disburse funds and finalize instructions
  • Offer advice - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about future tax estimations

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

This is a easy to understand guide about the escrow process. Your specific process could vary depending on your bank and your escrow company.

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