First, a little about "escrow". When you're closing on your new house, an escrow company is used to guarantee the process will close correctly and in a specific time frame. A house is said to be in escrow when in the closing process, money is held by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. An everyday way to understand the concept of what an escrow company does is to think of the use of PayPal for online purchases.
Tying up any loose ends like taking in funds, finishing forms, securing the documents for loans and liens, and making sure you get a clean title to the house before your purchase gets finalized are all parts of closing in which an escrow agent is useful.
Escrow companies collect the following legal documents:
- 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
- Terms of sale and any seller-assisted financing
Upon finishing of all instructions of the escrow, closing can take place. All debts and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then obtain the title to the home and the title insurance gets issued as noted in the escrow instructions.
At the close of escrow, in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.