Escrow: When you're closing on your new house, a neutral, third party (known as the escrow holder or the escrow agent) is used to guarantee the transaction will close correctly and in a timely manner. A house is said to be in escrow when in the closing process, money is held by a third party on behalf of a buyer and a seller when the exchange of money takes place. An easy way to understand the concept of what an escrow company does is to compare it to PayPal for online purchases.
The escrow holder insures that all terms and conditions of the seller's and buyer's agreement are performed prior to the sale being finished. This includes receiving funds and certificates, filling out required forms, and getting the release documents for any loans or liens that were cleared with the transaction, assuring you have a clear title to your house before the final price is fully paid.
The pieces of paperwork the escrow company may collect include:
- 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
You're ready to close when every step is complete in escrow process. All outstanding payments and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then get the title to the house and the title insurance gets issued as noted in the escrow instructions.
The escrow agent receives a payment when the closing is complete. As your real estate professional, I'll let you know what is an acceptable form of payment.