Let's talk about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is used to assure your house closes on time and the process goes smoothly. Escrow companies hold money for "safe-keeping" in an exchange between a buyer and seller. An easy way to understand what an escrow company does is to compare it to PayPal for Internet purchases.
The escrow company insures that all terms and conditions of the seller's and buyer's contract are performed prior to the sale being finalized. This includes receiving monies and certificates, completing required forms, and obtaining the release documents for any loans or liens that were cleared with the transaction, assuring you have a clear title to your home before the negotiated price is fully paid.
Escrow companies look for the following pieces of paperwork:
- 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 property happens when all of the procedures of the escrow are finished. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. Title to the house is then transferred to you as new homeowner and related title insurance is issued as noted in the escrow instructions.
When closing is in it's last step, you'll make a payment to the escrow company. As your real estate agent, I'll inform you of the acceptable form of payment.