Let's talk about "escrow". To close the sale of a place, a neutral, third party (the escrow holder) is brought into the picture to assure the transaction will close properly and on time. A place is said to be in escrow when in the closing process, money is held by a third party on behalf of two parties (in this case, a buyer and a seller) when the transaction is taking place. A simple way to understand the concept of what an escrow company does is to think of the use of PayPal for Internet purchases.
The escrow company is careful to assure that all terms and conditions of the seller's and buyer's agreement are completed prior to the sale being finished. This includes receiving funds and paperwork, completing required forms, and seeking out the release documents for any loans or liens that have been cleared with the transaction, assuring you have a free title to your home before the purchase price is fully paid.
Escrow companies compile the following legal documents:
- 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
You're ready to close when all steps are finished in escrow process. All debts and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then obtain the title to the house and the title insurance gets dispersed as stated in the escrow instructions.
The escrow company receives a payment when the closing is complete. You'll know when it's time to submit the form of payment.