Let's talk about "escrow". To finalize the sale of a place, a neutral, third party (the escrow holder) is brought into the picture to assure the transaction will close properly and on time. A house is said to be in escrow when in the closing process, funds 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 understand what an escrow company does is to think of how you might use PayPal for online purchases.
The escrow agent is careful to assure that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being completed. This includes securing payments and paperwork, filling out required forms, and seeking out the release documents for any loans or liens that are to be paid off with the transaction, assuring you have a free title to your property before the purchase price is fully paid.
These are the documents that escrow agents usually look for:
- Requests for payment for various services to be paid out of escrow funds
- Loan documents
- Tax statements
- Fire and other insurance policies
- Title insurance policies
- Terms of sale and any seller-assisted financing
Closing on the house happens when all of the procedures of the escrow are complete. All payments owed and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then secure the title to the property and the title insurance gets dispersed as stated in the escrow instructions.
The escrow company gets a payment when the closing is complete. I'll keep you up-to-date on what comes next.