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Completing the Transaction

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Let's talk about "escrow". To finalize the sale of a home, a neutral, third party (the escrow agent) is engaged to assure the process will close correctly and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in a Web auction, PayPal is the neutral third party that obtains the buyer's money, and then sends the money to the seller.

The escrow holder insures that all terms and conditions of the seller's and buyer's negotiated agreement are completed prior to the sale being finalized. This includes securing payments and documents, signing required forms, and getting the release documents for any loans or liens that were cleared with the transaction, assuring you have a clear title to your home before the final price is fully paid.

These are the pieces of paperwork that escrow companies usually look for:

  • 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
  • Tax statements

Upon finishing of all portions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. Title to the property is then transferred to you as buyer and related title insurance is issued as outlined in the escrow instructions.

The escrow holder gets a payment when the closing is complete. As your agent, I'll let you know what is an acceptable way of paying.

The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow instructions
  • Perform a title inquiry
  • Meet lender's standards as specified in the escrow agreement
  • Receive 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 finalize instructions
  • Tell you what's best - the escrow agent stays a neutral, third-party status
  • Dispense opinions about tax implications

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. 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 quick run-down of the escrow process. Your specific methods will be different depending on your bank and your escrow agent.

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