First, a little about "escrow". To finish the sale of a house, a neutral, third party (the escrow agent) is engaged to assure the process will close appropriately and on time. A home is said to be in escrow when in the closing process, funds is held by a third party on behalf of a buyer and a seller when the transaction is taking place. An everyday way to understand what an escrow company does is to think of how you might use PayPal for Internet purchases.
The escrow agent insures that all terms and conditions of the seller's and buyer's contract are performed prior to the sale being completed. This includes getting payments and records, finishing required forms, and obtaining the release documents for any loans or liens that are to be cleared with the transaction, assuring you have a clear title to your house before the asking price is fully paid.
The pieces of paperwork the escrow company may secure include:
- 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
Closing on the home happens when the steps of the escrow are complete. All payments owed and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). The property's title gets transferred to you and title insurance is issued per the steps of your particular escrow process.
When closing is finished, you'll submit a payment to the escrow holder. You'll know when it's time to submit the form of payment.