Let's talk about "escrow". To close the sale of a property, a neutral, third party (the escrow company) is engaged to assure the process will close appropriately and on time. Escrow companies hold money for "safe-keeping" in an exchange between a buyer and seller. For example, in an Internet transaction, PayPal is the reliable third party that holds the buyer's payment, and then sends the money to the seller.
The escrow holder makes sure 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 payments and certificates, filling out required forms, and getting 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 asking price is fully paid.
The pieces of paperwork the escrow agent may secure include:
- 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
- Loan documents
- Tax statements
Closing on the home takes place when all of the procedures of the escrow are complete. All payments owed and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the house is then transferred to you as buyer and appropriate title insurance is issued as noted in the escrow policy.
At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.