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What is Escrow?
Let's talk about "escrow". To complete the sale of a house, a neutral, third party (the escrow agent) is engaged to assure the transaction will close perfectly and on time.
A house is said to be in escrow when in the closing transaction, money is secured by a third party on behalf of a buyer and a seller when the transaction is taking place.
A simple way to think of what an escrow company does is to think of the use of PayPal for Internet purchases.
The escrow company makes sure that the terms and conditions of the agreement between the two parties are performed prior to the sale being finalized.
Escrow holders want to acquire the following pieces of paperwork:
- Loan documents
- 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
Closing on the home takes place when the steps of the escrow are done.
All debts and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions).
Title to the home is then given to you as new owner and appropriate title insurance is issued as outlined in the escrow instructions.
When closing is done, you'll pay the fees to the escrow company.
We'll keep you informed on the procedure.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow guidelines
- Request title search
- Comply with the bank's guidelines as noted in the escrow agreement
- Intake payments from the buyer
- Prorate interest, insurance, tax and other payments according to instructions
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been met
- Disburse monies and finish instructions
- Advise you - the escrow agent stays at an impartial, third-party status
- Give insight about the outcome of your taxes
Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house.
Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.
Now you know more about being in escrow. And, you can be a smarter home buyer and future homeowner.