First, a little about "escrow". To complete the sale of a house, a neutral, third party (the escrow agent) is employed to assure the process will close properly and on time. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an online transaction, PayPal is the reliable third party that holds the buyer's funds, and then disburses the payment to the seller.
The escrow holder makes sure that all terms and conditions of the seller's and buyer's agreement are completed prior to the sale being completed. This includes receiving funds and documents, signing required forms, and getting the release documents for any loans or liens that are to be paid off with the transaction, assuring you have a clean title to your place before the agreed upon price is fully paid.
Escrow holders look for the following legal documents:
- 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 happens when the steps of the escrow are done. 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 noted in the escrow policy.
At the close of escrow, payments are submitted in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.