The purpose of an escrow
Escrow is the depositing of funds and documents by the parties with an impartial third party for delivery upon completion of the terms of the escrow instructions.
The escrow holder impartially carries out the written instructions given by the principals (seller, buyer, lender). This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion.
The common use of an escrow is to enable the parties in a real estate transaction to deal with each other with less risk since the escrow holder acts as:
A typical escrow transaction
An escrow begins with the customer giving the necessary information regarding the transaction and requesting the title company to order a preliminary title report.
A preliminary title report provides the customer with an analysis of the present status of the property as revealed by the public records filed or recorded in the county in which the property is located.
Upon receipt of the preliminary title report, an analysis is made to determine the steps to be taken to close any and all outstanding debts and liens. At that time the escrow holder shall order any required demand. Upon receipt of loan documents further analysis is done to make sure the escrow holder can comply with said instructions.
When all title company and financial instruction requirements are deemed to be in order, the escrow officer will then draw the required instructions and statements.
You may be asked to complete a Statement of Identity as part of the escrow process. Due to the fact that many people have the same name, the Statement of Identity is used to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is considered confidential.
During the escrow process, you are required to make your payments on existing loans so that you do not incur any late fees or damages to your credit rating.
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