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

The process of buying a home for the first time can be confusing. I can help. E-mail me at hanleyappraisals@hotmail.com .

Steps to Closing on a House

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Escrow: To finalize the sale of a property, a neutral, third party (the escrow company) is engaged to assure the process will close appropriately and on time. A house is said to be in escrow when in the closing process, payment is secured by a third party on behalf of two parties when the transaction is taking place. A simple way to understand the concept of what an escrow company does is to think of how you might use PayPal for online purchases.

Clearing the final hurdles like obtaining funds, finishing forms, securing the documents for loans and liens, and making sure you get a clear title to the home in preparation of your purchase gets finalized are all part of the job of the escrow holder.

The certificates the escrow company may collect include:

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

You're ready to close when all steps are complete in escrow process. At this time, all payments and fees for inspections, title insurance and real estate commissions are taken. You'll then secure the title to the property and the title insurance gets issued as noted in the escrow instructions.

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

The Escrow Holder Will:

Assemble escrow instructions
Perform a title research
Meet the bank's requirements as outlined in the escrow agreement
Accept funds from the buyer
Prorate interest, insurance, tax and other payments according to guidelines
Record deeds and other legal documents as instructed
Obtain title insurance policy
Close escrow when all terms of agreement of seller and buyer have been met
Disburse funds and finish instructions

The Escrow Holder Won't:

Give advice - the escrow holder must maintain a neutral, third-party status
Give insight about tax implications

The Escrow Holder Will:		The Escrow Holder Won't:
Write escrow guidelines Petition title research Comply with lender's requirements as specified in the escrow agreement Receive payments from the buyer Prorate insurance, tax, interest and other payments according to instructions Record deeds and other paperwork as instructed Obtain title insurance policy Close escrow when all instructions of seller and buyer have been met Disburse funds and finalize instructions		Give advice - the escrow holder stays 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. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.

This is a quick run-down of the escrow process. Your particular methods will be unique based on your bank and your escrow agent.

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