Escrow: A neutral, third party (known as the escrow holder or the escrow agent) is brought on to assure your home closes on time and the transaction goes smoothly. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. An everyday way to understand what an escrow company does is to think of the use of PayPal for online purchases.
The escrow company makes sure that all terms and conditions of the seller's and buyer's contract are met prior to the sale being finalized. This includes getting monies and documents, completing required forms, and obtaining the release documents for any loans or liens that were paid with the transaction, assuring you have a clean title to your place before the agreed upon price is fully paid.
The documents the escrow holder may secure include:
- 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
Closing on the property takes place when the steps of the escrow are finished. At this time, all payments and dues for inspections, title insurance and real estate commissions are paid out. Title to the home is then given to you as now current homeowner and correct title insurance is issued as outlined in the escrow instructions.
At the close of escrow, fees are paid in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.