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 guarantee the process will close correctly and in a specific time frame. A home is said to be in escrow when in the closing process, funds is held by a third party on behalf of two parties when the transaction is taking place. For example, in a Web transaction, PayPal is the neutral third party that holds the buyer's funds, and then disburses the funds to the seller.
The escrow holder makes sure that all terms and conditions of the seller's and buyer's contract are met prior to the sale being completed. This includes getting funds and certificates, filling out 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 house before the purchase price is fully paid.
The pieces of paperwork the escrow agent may collect include:
- 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
Closing on the home takes place when the steps of the escrow are finished. All outstanding payments and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). The home's title gets transferred to you and title insurance is issued per the policies of your individual escrow process.
At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. I'll keep you informed on the next steps.