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First-Time Home Buying: How To Close on a Property

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Let's talk about "escrow". To finalize the sale of a place, a neutral, third party (the escrow holder) is employed to assure the transaction will close perfectly and on time. Escrow agents hold money for "safe-keeping" in transactions between a buyer and seller. For example, in a Web auction, PayPal is the secure third party that obtains the buyer's funds, and then disburses the payment to the seller.

The escrow company is careful to assure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being finalized. This includes receiving payments and paperwork, completing required forms, and seeking out the release documents for any loans or liens that are to be paid with the transaction, assuring you have a free title to your property before the negotiated price is fully paid.

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

Closing on the home takes place when all of the procedures of the escrow are done. All outstanding payments and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). The home's title gets handed over to you and title insurance begins per the policies of your individual escrow process.

The escrow holder receives a payment when the closing is complete. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Write escrow guidelines
  • Perform a title inquiry
  • Comply with lender's requirements as specified in the escrow agreement
  • Receive payments 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 have been met
  • Disburse funds and finalize instructions

The Escrow Holder Won't:

  • Tell you what's best - the escrow company stays at an impartial, third-party status
  • Dispense opinions about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Petition title inquiry
  • Meet the bank's requirements as specified in the escrow agreement
  • Receive payments 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 instructions of seller and buyer are met
  • Disburse payments and finish instructions
  • Offer advice - the escrow agent stays a neutral, third-party status
  • Dispense opinions 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. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

This is a quick run-down of the escrow process. Your particular plan may vary based on your bank and your escrow company.

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