Understanding how Escrow works – Hickerson Realty, Tulsa, OK

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Steps to Closing on a House

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First, a little about "escrow". When you're closing on your new home, an escrow company is used to ensure the process will close without problems and in a certain amount of time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. An everyday way to understand the concept of what an escrow company does is to think of the use of PayPal for online purchases.

The escrow agent makes sure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being completed. This includes receiving funds and paperwork, filling out required forms, and getting the release documents for any loans or liens that were cleared with the transaction, assuring you have a clear title to your home before the negotiated price is fully paid.

These are the documents that escrow agents usually look for:

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 completion of all portions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. Title to the property is then transferred to you as new owner and correct title insurance is issued as outlined in the escrow policy.

The escrow holder gets a payment at the completion of closing. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Prepare escrow guidelines
Perform a title inquiry
Meet lender's requirements as noted in the escrow agreement
Receive funds from the buyer
Prorate interest, insurance, tax and other payments according to instructions
Record deeds and other documents as instructed
Obtain title insurance policy
Close escrow when all terms of agreement of seller and buyer have been finished
Disburse monies and finish instructions

The Escrow Holder Will Not:

Give advice - the escrow agent stays a neutral, third-party status
Dispense opinions about tax implications

The Escrow Holder Will:		The Escrow Holder Won't:
Assemble escrow guidelines Petition title inquiry 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 Obtain title insurance policy Close escrow when all terms of agreement of seller and buyer are met Disburse monies and finalize instructions		Offer advice - the escrow company has to remain an impartial, third-party status Dispense opinions about tax implications

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.

Now you know more about how to close on your future home. And, you can be a more confident home buyer and future homeowner.

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