Escrow: To complete the sale of a home, a neutral, third party (the escrow holder) is engaged to assure the process will close perfectly and on time. Escrow companies hold money for "safe-keeping" in a deal between a buyer and seller. An easy way to understand what an escrow company does is to think of how you might use PayPal for online purchases.
The escrow company makes sure that the terms and conditions of the agreement between the two parties are met in preparation of the sale being completed.
These are the pieces of paperwork that escrow companies usually compile:
- 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 finishing of all portions 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 obtain the title to the property and the title insurance gets dispersed as stated in the escrow instructions.
At the close of escrow, payments of funds are made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.