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First-Time Home Buying: How To Close on a Place
Let's talk about "escrow". To finalize the sale of a property, a neutral, third party (the escrow agent) is engaged to assure the process will close appropriately and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a good way to picture an escrow company.
The escrow agent is careful to assure that all terms and conditions of the seller's and buyer's negotiated agreement are performed prior to the sale being finished. This includes receiving funds and paperwork, signing required forms, and getting 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 asking price is fully paid.
These are the legal documents that escrow holders usually look to collect:
- 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
Upon finishing of all portions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. The home's title goes to you and title insurance begins per the policies of your individual escrow process.
The escrow holder receives a payment at the completion of closing. As your agents, we'll let you know what is an acceptable way of paying.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow instructions
- Petition title research
- Meet lender's guidelines as outlined in the escrow agreement
- Accept funds from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer have been finished
- Disburse funds and finalize instructions
- Advise you - the escrow holder stays at an impartial, third-party status
- Dispense opinions about future tax estimations
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.
Once you have the ABCs of the escrow process down, you can be a confident buyer.
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