Escrow: A neutral, third party (known as the escrow holder or the escrow agent) is used to assure your house closes on time and the process goes smoothly. A property is said to be in escrow when in the closing transaction, money is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes 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 sellers and the buyers are reached in preparation of the sale being finalized.
The pieces of paperwork the escrow agent may secure include:
- 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 house takes place when the steps of the escrow are finished. At this time, all payments and fees for inspections, title insurance and real estate commissions are taken. You'll then obtain the title to the house and the title insurance gets issued as agreed upon in the escrow instructions.
At the close of escrow, in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.