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First-Time Home Buying: How To Close on a Property
Let's talk about "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 guarantee the process will close without problems and in a specific time frame.
Escrow agents hold money for "safe-keeping" in an exchange between a buyer and seller.
For example, in an online purchase, PayPal is the neutral third party that holds the buyer's payment, and then disburses the funds to the seller.
The escrow company is careful to assure that all terms and conditions of the seller's and buyer's negotiated agreement are met prior to the sale being finalized. This includes getting monies and certificates, finishing required forms, and seeking out the release documents for any loans or liens that have been paid with the transaction, assuring you have a clean title to your place before the purchase price is fully paid.
Escrow agents want to obtain the following legal documents:
- 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 instructions of the escrow, closing can take place.
All payments owed and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions).
The house's title goes to you and title insurance is issued per the policies of your particular escrow process.
When closing is completely finished, you'll make a payment to the escrow company.
As your real estate professionals, we'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 the bank's standards as noted in the escrow agreement
- Receive funds from the buyer
- Prorate tax, interest, insurance and other fees according to guidelines
- Record deeds and other documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer have been met
- Disburse funds and finish instructions
- Give advice - the escrow holder must maintain a neutral, third-party status
- Offer opinions 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.
Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
Now you know more about being in escrow. And, you can be a smarter home buyer and future homeowner.