Escrow: To close the sale of a house, a neutral, third party (the escrow holder) is brought into the picture to assure the transaction will close properly and on time. 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 the concept of what an escrow company does is to think of how you might use PayPal for online purchases.
The escrow company insures that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being finalized. This includes getting payments and paperwork, signing required forms, and getting the release documents for any loans or liens that were paid with the transaction, assuring you have a free title to your property before the agreed upon price is fully paid.
The certificates the escrow holder may collect include:
- Tax statements
- 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
Upon completion of all portions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. The home's title goes to you and title insurance begins per the policies of your particular escrow process.
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.