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

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Escrow: To finish the sale of a place, a neutral, third party (the escrow agent) is engaged to assure the transaction will close properly and on time. When money is held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a good example of an escrow company.

Clearing the final hurdles like receiving funds, completing forms, securing 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 parts of closing in which an escrow holder is useful.

The records the escrow holder may secure include:

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

You're ready to close when every step is complete in escrow process. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. The home's title goes to you and title insurance begins per the policies of your particular escrow agreement.

At the close of escrow, payments of funds are made in an acceptable form to the escrow. As your REALTOR, I'll inform you of the acceptable way of paying.

The Escrow Holder Will:

Prepare escrow instructions
Perform a title search
Comply with lender's requirements as noted in the escrow agreement
Intake funds from the buyer
Prorate tax, interest, insurance and other fees 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 payments and finalize instructions

The Escrow Holder Will Not:

Offer advice - the escrow agent must stay at a fair, third-party status
Offer opinions about tax implications

The Escrow Holder Will:		The Escrow Holder Won't:
Assemble escrow instructions Petition title search Comply with the bank's standards as written in the escrow agreement Receive 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 funds and finalize instructions		Offer advice - the escrow agent must maintain a neutral, third-party status Give insight about tax implications

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.

This is a quick run-down of the escrow process. Your individual process may be slightly different based on your bank and your escrow holder.

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