Let's talk about "escrow". To finalize the sale of a home, a neutral, third party (the escrow company) is engaged to assure the process will close perfectly and on time. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. An easy way to understand what an escrow company does is to compare it to PayPal for online purchases.
The escrow agent 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 getting payments and documents, completing 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 clear title to your place before the agreed upon price is fully paid.
These are the legal documents that escrow holders usually compile:
- 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
Upon finishing of all instructions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. The home's title gets transferred to you and title insurance begins per the steps of your particular escrow process.
When closing is completed, you'll make a payment to the escrow company. You'll know when it's time to submit the form of payment.