Understanding How Escrow Works – Toni Williams, Morris Williams Realty

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Completing the Transaction

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First, a little about "escrow". An escrow holder is used to assure your place closes on time and the transaction goes smoothly. Escrow holders hold money for "safe-keeping" in a deal between a buyer and seller. For example, in an online auction, PayPal is the neutral third party that holds the buyer's cash, and then disburses the money to the seller.

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

The pieces of paperwork the escrow holder may collect include:

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

Upon completion of all instructions of the escrow, closing can take place. All payments owed and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then secure the title to the home and the title insurance gets dispersed as outlined in the escrow instructions.

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:		The Escrow Holder Won't:
Write escrow instructions Request title research Comply with lender's standards as noted in the escrow agreement Accept funds from the buyer Prorate tax, interest, insurance and other fees according to instructions Record deeds and other documents as instructed Obtain title insurance policy Close escrow when all terms of agreement of seller and buyer have been met Disburse funds and finalize instructions		Advise you - the escrow agent stays a neutral, third-party status Give insight about the outcome of your taxes

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

Once you're at ease with the escrow process, you can be a confident buyer.