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Steps to Closing on a Property
Let's talk about "escrow". When you're closing on your new property, an escrow company is used to insure the transaction will close correctly and in a timely manner.
Escrow companies hold money for "safe-keeping" in transactions 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 makes sure that the terms and conditions of the agreement between the seller and buyer are performed in preparation of the sale being finished.
Escrow holders look for the following forms:
- 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 property takes place when the steps of the escrow are finished.
All payments owed and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions).
You'll then get the title to the property and the title insurance gets dispersed as stated in the escrow instructions.
The escrow agent receives a payment at the completion of closing.
As your real estate agent, I'll let you know what is an acceptable way of paying.
The Escrow Holder Will:
The Escrow Holder Won't:
- Prepare escrow guidelines
- Perform a title inquiry
- Meet lender's guidelines as written in the escrow agreement
- Receive funds from the buyer
- Prorate interest, insurance, tax and other payments according to guidelines
- Record deeds and other legal documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer are complete
- Disburse funds and finalize instructions
- Offer advice - the escrow company must stay at a fair, third-party status
- Dispense opinions about future tax estimations
Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created.
Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.
Once you have the basics of the escrow process down, you can be a confident buyer.