Let's talk about "escrow". When you're closing on your new house, an escrow holder is used to make sure the process will close correctly and in a specific time frame. A house is said to be in escrow when in the closing transaction, money is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. An easy way to think of what an escrow company does is to think of how you might use PayPal for online purchases.
Tying up any loose ends like taking in funds, completing forms, obtaining the documents for loans and liens, and assuring you get a clear title to the home prior to your purchase gets finalized are all parts of closing in which an escrow company is useful.
These are the legal forms that escrow agents usually look to collect:
- 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
Upon finishing of all portions of the escrow, closing can take place. All payments owed and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). The house's title gets handed over to you and title insurance begins per the policies of your individual escrow process.
At the close of escrow, fees are paid in an acceptable form to the escrow. As your real estate agent, I'll inform you of the acceptable form of payment.