Understanding how Escrow works – Provident Realty Group, Dublin, CA

Purchasing a house for the first time can be overwhelming. I can help. E-mail me at robert@providentrealtygroup.com .

What is Escrow?

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First, a little about "escrow". An escrow company is hired to assure your home closes on time and the money exchanging part of closing goes smoothly. 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 money, and then disburses the money to the seller.

The escrow agent makes sure that the terms and conditions of the agreement between the sellers and the buyers are met in preparation of the sale being completed.

These are the pieces of paperwork that escrow companies usually look to collect:

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
Fire and other insurance policies

Closing on the property happens when all of the procedures of the escrow are finished. All outstanding payments and fees are collected and paid 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 outlined in the escrow policy.

The escrow agent receives a payment when the closing is complete. As your agent, I'll let you know what is an acceptable way of paying.

The Escrow Holder Will:

Write escrow instructions
Petition title research
Comply with the bank's guidelines as outlined in the escrow agreement
Intake funds from the buyer
Prorate interest, insurance, tax and other payments according to instructions
Record deeds and other legal documents as instructed
Request title insurance policy
Close escrow when all instructions of seller and buyer have been finished
Disburse payments and finalize instructions

The Escrow Holder Won't:

Advise you - the escrow company must maintain a neutral, third-party status
Give insight about tax implications

The Escrow Holder Will:		The Escrow Holder Won't:
Prepare escrow instructions Perform a title research Meet lender's guidelines as outlined in the escrow agreement Accept funds from the buyer Prorate insurance, tax, interest and other payments according to guidelines Record deeds and other documents as instructed Obtain title insurance policy Close escrow when all terms of agreement of seller and buyer are met Disburse monies and finish instructions		Offer advice - the escrow holder stays at an impartial, third-party status Give insight about future tax estimations

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

Once you're comfortable with the escrow process, you can be a informed buyer.

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