How Escrow Works

Home Purchasing How Escrow Works

Understanding Escrow

Escrow is a stage in the process that begins immediately after both parties agree to and sign the offer contract. 

In this stage,  we are utilizing a third party who is unbiased and trusted that will assure that both the buyer and the seller have met all of the obligations that they mutually agreed upon. 

In other words, they will assure that all of the terms and conditions are met and the transaction closes properly and on time. 

South County Mortgages What is Escrow?

The Escrow Holder Will:

  • Prepare escrow instructions
  • Request a title search to assure it is a clean title with no liens
  • Collect and verify any property inspections
  • Comply with the lender’s requirements as specified in the escrow agreement
  • Receive funds from the buyer
  • Prorate insurance/tax/interest and other payments according to the instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of the seller and buyer have been met
  • Disburse funds and finalize the transaction

The Escrow Holder Won’t:

  • Give advice – the escrow holder must maintain neutral third-party status
  • Offer opinions about tax implication

Upon completion of all of the instructions in the escrow, the closing will take place. During the closing, all outstanding payments and fees are collected and paid. This will include expenses such as title insurance, inspections, real estate commissions, transfer of funds from the lender and your down payment. 

The title of the property is then transferred from the seller to the buyer and all appropriate documentation is distributed to both parties as outlined in the escrow instructions.

For both parties, this stage can bring up a lot of anxiousness because we are so close to the finish line.  As your mortgage professional, we have great relationships with the escrow companies and will keep you well informed during the home stretch of your purchase. 

Mortgage Escrow Account

A Mortgage Escrow Account is established to pay on-going expenses while there is a loan on the house. These expenses include property taxes, home insurance, mortgage insurance, and other escrow items. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.