How Escrow Works


  • Statement of Identity from the buyer(s)
  • 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 will typically go to the escrow/title company office to sign loan documents and prior to closing escrow, you will be notified of the amount of funds required to be brought to escrow. These funds typically must be in the form of a cashiers check.

Upon completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then transferred to the buyer and appropriate title insurance is issued as outlined in the escrow instructions.

  • Prepare escrow instructions
  • Request title search
  • Comply with lender’s requirements as specified in the loan documents
  • Receive funds from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been met
  • Disburse funds and finalize instructions
  • Give advice – the escrow holder must maintain neutral, third-party status
  • Offer opinions about tax implications

A Mortgage Escrow Account is set up by your lender (optional), and is also referred to as an Impound Account. This is different than what is described above.

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.

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