Understanding how Escrow works – Hanley Agency, Inc., Pittsburgh, PA

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Let's talk about "escrow". To close the sale of a home, a neutral, third party (the escrow agent) is engaged to assure the process will close properly and on time. A place is said to be in escrow when in the closing transaction, payment is held by a third party on behalf of a buyer and a seller when the transaction is taking place. PayPal is a good way to picture an escrow company.

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

These are the records that escrow companies usually look to collect:

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
Title insurance policies

You're ready to close when each step of the finished in escrow process. At this time, all payments and dues for inspections, title insurance and real estate commissions are paid out. Title to the property is then transferred to you as now current homeowner and correct title insurance is issued as outlined in the escrow policy.

When closing is completed, you'll submit a payment to the escrow agent. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Write escrow guidelines
Perform a title inquiry
Comply with lender's guidelines as outlined in the escrow agreement
Receive payments from the buyer
Prorate insurance, tax, interest and other payments according to guidelines
Record deeds and other paperwork as instructed
Request title insurance policy
Close escrow when all terms of agreement of seller and buyer have been met
Disburse payments and finalize instructions

The Escrow Holder Will Not:

Advise you - the escrow holder has to remain an impartial, third-party status
Dispense opinions about the outcome of your taxes

The Escrow Holder Will:		The Escrow Holder Won't:
Prepare escrow instructions Request title search Meet lender's standards as specified in the escrow agreement Receive funds from the buyer Prorate tax, interest, insurance and other fees according to guidelines 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 monies and finalize instructions		Advise you - the escrow holder must stay at a fair, third-party status Offer opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is used to make payments for on-going fees while there is a loan on the house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

This is a simple outline of the escrow process. Your specific methods may be different depending on your lender and your escrow company.

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