First, a little about "escrow". To complete the sale of a property, a neutral, third party (the escrow holder) is engaged to assure the process will close properly and on time. Escrow companies hold money for "safe-keeping" in an exchange between a buyer and seller. For example, in an Internet purchase, PayPal is the neutral third party that holds the buyer's payment, and then disburses the payment to the seller.
The escrow holder makes sure that all terms and conditions of the seller's and buyer's agreement are completed prior to the sale being completed. This includes securing funds and paperwork, filling out required forms, and obtaining the release documents for any loans or liens that are to be paid off with the transaction, assuring you have a free title to your property before the purchase price is fully paid.
These are the legal documents that escrow agents usually look to collect:
- 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 completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). The house's title is given to you and title insurance is issued per the policies of your individual escrow agreement.
When closing is finished, you'll make a payment to the escrow holder. As your real estate professional, I'll inform you of the acceptable form of payment.