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

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What is Escrow?

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Escrow: When you're closing on your new home, an escrow agent is used to ensure the transaction will close appropriately and on time. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an Internet auction, PayPal is the secure third party that holds the buyer's money, and then sends the payment to the seller.

Settling the last details like receiving funds, signing forms, getting the documents for loans and liens, and assuring you get a clear title to the house in preparation of your purchase gets finalized are all part of the job of the escrow holder.

Escrow agents want to acquire the following records:

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
Loan documents

You're ready to close when all steps are finished in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. You'll then obtain the title to the house and the title insurance gets issued as noted in the escrow instructions.

The escrow agent receives a payment at the completion of closing. As your real estate professional, I'll let you know what is an acceptable form of payment.

The Escrow Holder Will:

Write escrow guidelines
Request title search
Comply with the bank's requirements as written in the escrow agreement
Intake payments from the buyer
Prorate interest, insurance, tax and other payments according to guidelines
Record deeds and other legal documents as instructed
Request title insurance policy
Close escrow when all terms of agreement of seller and buyer have been met
Disburse monies and finish instructions

The Escrow Holder Won't:

Advise you - the escrow company must maintain a neutral, third-party status
Give insight about the outcome of your taxes

The Escrow Holder Will:		The Escrow Holder Won't:
Write escrow instructions Petition title search Comply with lender's requirements as outlined in the escrow agreement Accept funds from the buyer Prorate tax, interest, insurance and other fees according to instructions 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 funds and finalize instructions		Tell you what's best - the escrow agent has to remain an impartial, third-party status Offer opinions about future tax estimations

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

Now you know more about being in escrow. And, you can be a more informed home buyer and future homeowner.

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