Let's talk about "escrow". When you're closing on your new property, an escrow agent is used to ensure the transaction will close properly and in a timely manner. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an online purchase, PayPal is the neutral third party that obtains the buyer's cash, and then disburses the funds to the seller.
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 finished. This includes receiving funds and paperwork, completing required forms, and obtaining the release documents for any loans or liens that have been paid with the transaction, assuring you have a clear title to your house before the negotiated price is fully paid.
These are the legal forms that escrow agents usually look for:
- 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 finishing of all instructions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. Title to the house is then given to you as new owner and correct title insurance is issued as noted in the escrow policy.
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.