Understanding how Escrow works – Hanley Agency, Inc., Pittsburgh, PA

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Escrow: When you're closing on your new property, an escrow holder is used to make certain the transaction will close properly and in a specific time frame. A house is said to be in escrow when in the closing process, money is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the transaction is taking place. PayPal is a good way to picture an escrow company.

Tying up any loose ends like taking in funds, signing forms, getting the documents for loans and liens, and making sure you get a clean title to the house in preparation of your purchase gets finalized are all part of the job of the escrow holder.

These are the legal documents that escrow agents usually look for:

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

You're ready to close when every step is done in escrow process. At this time, all payments and fees for inspections, title insurance and real estate commissions are paid out. Title to the home is then transferred to you as new homeowner and appropriate title insurance is issued as noted in the escrow policy.

At the close of escrow, fees are paid in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Write escrow instructions
Request title search
Meet lender's requirements as written in the escrow agreement
Accept funds from the buyer
Prorate interest, insurance, tax and other payments according to instructions
Record deeds and other paperwork as instructed
Obtain title insurance policy
Close escrow when all terms of agreement 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
Give insight about future tax estimations

The Escrow Holder Will:		The Escrow Holder Won't:
Prepare escrow guidelines Perform a title inquiry Comply with lender's requirements as outlined in the escrow agreement Receive payments from the buyer Prorate interest, insurance, tax and other payments according to instructions Record deeds and other legal documents as instructed Request title insurance policy Close escrow when all instructions of seller and buyer have been finished Disburse payments and finish instructions		Advise you - the escrow holder must maintain a neutral, third-party status Offer opinions about future tax estimations

Mortgage Escrow Account

A Mortgage Escrow Account is used to make payments for rolling expenses while there is a loan on the house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

This is a quick run-down of the escrow process. Your individual methods might vary depending on your lender and your escrow holder.

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