Escrow: When you're closing on your new house, a neutral, third party (known as the escrow holder or the escrow agent) is used to make sure the process will close without problems and in a specific time frame. A property is said to be in escrow when in the closing process, payment is held by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. For example, in an Internet purchase, PayPal is the secure third party that holds the buyer's money, and then disburses the funds to the seller.
The escrow company makes sure that all terms and conditions of the seller's and buyer's negotiated agreement are completed prior to the sale being completed. This includes getting funds and documents, signing required forms, and seeking out the release documents for any loans or liens that have been cleared with the transaction, assuring you have a clear title to your house before the agreed upon price is fully paid.
Escrow holders want to acquire the following legal documents:
- Title insurance policies
- 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
Upon completion of all portions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. The house's title gets transferred to you and title insurance is issued per the steps of your particular escrow process.
The escrow holder gets a payment when the closing is complete. I'll keep you informed on the procedure.