In the process of buying a home, you'll probably do a lot of research about terms that you'll encounter along the way. Escrow is one of those things in the process that you may want to look into because it protects your interest and the interest of the seller.
If for example you're in the market for Mount Vernon real estate and are looking through Mount Vernon homes for sale, you'll want to know what you'll go through in the closing process and how escrow fits into the picture. Below is a quick overview of what basically happens during the closing process. There may be variations to the process, depending on your agreement with the seller, though.
Open an escrow account. This is a third party account which will hold important documents and money in order to ensure a fair exchange at proper time correct time. For example, the escrow manager will hold on to your earnest money, which will be given to the seller should you back out of the buying contract without sufficiently acceptable reason, or back to you should you back out within the provisions of the law or the contract. Should the sales push through, the money will be part of the downpayment. It protects your interest as a buyer that your earnest money will be handed back should you have a valid reason not to go through with the purchase. It also protects the interest of the seller that he/she will be compensated for the time spent negotiating with you.
The house will be appraised. At this point the lender will send an appraiser to the property to check on the possible value of the house. This is to protect their interest that they will be able to sell the house and recover the investment should the borrower (in this case, you) default on mortgage payments and they have to foreclose.
Get the home inspected. Home inspection is a required part of the home buying process, however you can order a more indepth home inspection which looks at things that basic home inspection doesn't. Of course it's already a given that all houses have problems, even new ones. What's important is that you don't end up buying a lemon house or a house with dangerous problems, or problems that you're not willing to deal with. Having the house sufficiently inspected will prevent you from that mistake.
Get the title inspected and remove contingencies. Title inspection will make sure that nobody else is entitled to the property that you will buy. It's a tedious process involving tracing back the owners of the property and modifications made on the title. Once you're sure that the title is clear, you'll then go through the contingencies and see if they can be removed.
Close escrow. After all these are done, you can then close escrow. This means exchanging documents, signing them, and exchanging payments. The escrow manager will make sure that a fair exchange of goods happens between the buyer and the seller, however you should make sure yourself that you have read the papers before you signed them.