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What is Escrow?
First, a little about "escrow". An escrow holder is used to assure your home closes on time and the transaction goes smoothly.
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 the concept of what an escrow company does is to compare it to PayPal for online purchases.
Clearing the final hurdles like taking in funds, signing forms, obtaining the documents for loans and liens, and assuring you get a spotless title to the home in preparation of your purchase gets finalized are all part of the job of the escrow company.
These are the records that escrow companies usually look for:
- 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 portions of the escrow, closing can take place.
All payments owed and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions).
Title to the property is then given to you as buyer and correct title insurance is issued as outlined in the escrow instructions.
At the close of escrow, in an acceptable form to the escrow.
I'll keep you updated on the procedure.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow guidelines
- Request title search
- Meet the bank's requirements as noted in the escrow agreement
- Accept funds from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been met
- Disburse monies and finalize instructions
- Give advice - the escrow holder must maintain a neutral, third-party status
- Offer opinions about the outcome of your taxes
Mortgage Escrow Account
A Mortgage Escrow Account is established to make payments for on-going fees while there is a loan on the house.
Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.
This is a quick run-down of the escrow process. Your specific plan will be unique based on your lender and your escrow holder.