Let's talk about "escrow". To complete the sale of a property, a neutral, third party (the escrow agent) is brought into the picture to assure the transaction will close perfectly and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in a Web transaction, PayPal is the secure third party that holds the buyer's payment, and then hands over the funds to the seller.
Tying up any loose ends like receiving funds, completing forms, getting the documents for loans and liens, and assuring you get a clear title to the home in preparation of your purchase gets finalized are all parts of closing in which an escrow agent is useful.
The documents the escrow company may secure include:
- 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
- Title insurance policies
You're ready to close when all steps are complete in escrow process. All outstanding payments and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the house is then given to you as new homeowner and appropriate title insurance is issued as noted in the escrow policy.
When closing is in it's last step, you'll submit a payment to the escrow holder. You'll know when it's time to submit the form of payment.