Understanding how Escrow works – HomeSmart Elite, Scottsdale, AZ

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Escrow 101

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First, a little about "escrow". When you're closing on your new property, an escrow agent is used to make certain the transaction will close without problems and on time. Escrow companies hold money for "safe-keeping" in a deal between a buyer and seller.

The escrow agent insures that all terms and conditions of the seller's and buyer's agreement are completed prior to the close of the transaction. This includes securing payments and documents, filling out required forms, and obtaining the release documents for any loans or liens that were paid with the transaction, assuring you have a free title to your home before releasing the funds.

These are the legal forms that escrow agents usually look for:

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 each step of the escrow process is complete. All expenses like title insurance, taxes and real estate commissions are paid. The property's title is given to you and title insurance begins per the policies of your individual escrow agreement.

The Escrow Holder Will:		The Escrow Holder Won't:
Assemble escrow instructions Request title research Comply with the bank's guidelines as specified in the escrow agreement Accept funds from the buyer Prorate tax, interest, insurance and other fees according to instructions Record deeds and other paperwork as instructed Request title insurance policy Close escrow when all terms of agreement of seller and buyer are complete Disburse payments and finalize instructions		Give advice - the escrow company stays at 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. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Escrow and Title officers are usually very nice and can answer any questions you might have.

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