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What is Escrow?

 Hanley Agency, Inc. can walk you through closing - 412-422-7900
Let's talk about "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 money exchanging part of closing goes smoothly. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. A simple way to understand the concept of what an escrow company does is to compare it to PayPal for online purchases.

The escrow holder makes sure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being completed. This includes receiving payments and records, signing required forms, and obtaining the release documents for any loans or liens that are to be paid off with the transaction, assuring you have a free title to your home before the purchase price is fully paid.

These are the legal forms that escrow holders usually look to collect:

  • 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
  • Terms of sale and any seller-assisted financing

Upon finishing of all portions of the escrow, closing can take place. All outstanding payments and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). The property's title gets handed over to you and title insurance is issued per the steps of your particular escrow agreement.

When closing is completely finished, you'll make a payment to the escrow company. As your real estate professional, I'll inform you of the acceptable form of payment.

The Escrow Holder Will:

  • Prepare escrow guidelines
  • Perform a title inquiry
  • Meet the bank's requirements as outlined in the escrow agreement
  • Accept payments from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other paperwork as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer are complete
  • Disburse payments and finish instructions

The Escrow Holder Won't:

  • Advise you - the escrow agent must maintain a neutral, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Request title inquiry
  • Meet the bank's requirements as specified in the escrow agreement
  • Intake funds from the buyer
  • Prorate insurance, tax, interest and other payments according to guidelines
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer have been finished
  • Disburse funds and finish instructions
  • Offer advice - the escrow company stays at an impartial, third-party status
  • Offer opinions about the outcome of your taxes

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.

Now you know more about how to close on your future home. And, you can be a better informed home buyer and future homeowner.

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