Escrow: When you're closing on your new home, an escrow holder is used to insure the process will close appropriately and in a timely manner. A place is said to be in escrow when in the closing process, payment is secured by a third party on behalf of two parties when the transaction is taking place. 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 receiving funds, signing forms, securing the documents for loans and liens, and making sure you get a clear title to the house in preparation of your purchase gets finalized are all parts of closing in which an escrow company is useful.
These are the legal documents that escrow holders 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
Closing on the house happens when the steps of the escrow are finished. All payments owed and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then receive the title to the property and the title insurance gets dispersed as noted in the escrow instructions.
When closing is completed, you'll make a payment to the escrow agent. You'll know when it's time to submit the form of payment.