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Buying Your Next Home: Closing
Escrow: To complete the sale of a house, a neutral, third party (the escrow holder) is brought into the picture to assure the process will close correctly and on time.
A house is said to be in escrow when in the closing transaction, payment is held by a third party on behalf of two parties when the exchange of money takes place.
For example, in a Web transaction, PayPal is the secure third party that obtains the buyer's money, and then hands over the payment to the seller.
The escrow agent makes sure that the terms and conditions of the agreement between the sellers and the buyers are performed in preparation of the sale being finished.
The certificates the escrow agent may collect include:
- 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 the steps of the escrow are complete.
All outstanding payments and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions).
You'll then obtain the title to the property and the title insurance gets issued as noted in the escrow instructions.
When closing is completely finished, you'll pay the fees to the escrow agent.
You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow guidelines
- Perform a title inquiry
- Meet lender's guidelines as written in the escrow agreement
- Receive payments from the buyer
- Prorate tax, interest, insurance and other fees 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 finalize instructions
- Offer advice - the escrow agent must maintain a neutral, third-party status
- Offer opinions about the outcome of your taxes
Mortgage Escrow Account
A Mortgage Escrow Account is started to make payments for rolling fees while there is a loan on the house.
Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
Now you know more about how to close on your future home. And, you can be a more confident home buyer and future homeowner.