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

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Escrow: When you're closing on your new home, an escrow holder is used to make certain the transaction will close correctly and on time. Escrow companies hold money for "safe-keeping" in transactions between a buyer and seller. A simple way to understand what an escrow company does is to think of how you might use PayPal for online purchases.

The escrow agent makes sure that the terms and conditions of the agreement between the two parties are completed prior to the sale being completed.

These are the legal forms that escrow holders usually compile:

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 all parts are done in escrow process. At this time, all payments and fees for inspections, title insurance and real estate commissions are paid out. The property's title is given to you and title insurance is issued per the steps of your particular escrow process.

At the close of escrow, fees are paid in an acceptable form to the escrow. As your agent, I'll let you know what is an acceptable way of paying.

The Escrow Holder Will:

Prepare escrow instructions
Perform a title search
Meet the bank's guidelines as noted in the escrow agreement
Receive funds from the buyer
Prorate tax, interest, insurance and other fees according to instructions
Record deeds and other documents as instructed
Request title insurance policy
Close escrow when all instructions of seller and buyer have been finished
Disburse funds and finalize instructions

The Escrow Holder Will Not:

Tell you what's best - the escrow holder has to remain an impartial, third-party status
Offer opinions about future tax estimations

The Escrow Holder Will:		The Escrow Holder Won't:
Prepare escrow instructions Request title search Meet the bank's standards as noted in the escrow agreement Accept funds from the buyer Prorate insurance, tax, interest and other payments according to guidelines Record deeds and other legal documents as instructed Obtain title insurance policy Close escrow when all terms of agreement of seller and buyer have been met Disburse payments and finalize instructions		Offer advice - the escrow company must stay at a fair, third-party status Dispense opinions about tax implications

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

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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