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An escrow letter is a formal agreement between a lender and a borrower that details the terms and conditions of a financial transaction. The purpose of an escrow letter is to protect both parties by ensuring that the funds are held in trust until the terms of the agreement are met.
Close of escrow is part of closing on a house when both parties complete their half of the agreement. It's important to note that close of escrow may or may not happen on the actual closing date. For instance, you could exchange all the necessary materials ahead of time before the title exchange.
The Bottom Line: Escrow Protects Both Buyers And Sellers It protects buyers and sellers during home sales, and offers a convenient way for you to pay for your taxes and insurance. An escrow account is sometimes required, and sometimes it's not. It depends on the type of loan you get, as well as your financial profile.
Most escrow agreements are put into place when one party wants to make sure the other party meets certain conditions or obligations before it moves forward with a deal. For instance, a seller may set up an escrow agreement to ensure a potential homebuyer can secure financing before the sale goes through.
While the property is held in escrow, the buyer cannot take possession of or occupy the space. Real estate deals must clear a series of stages during the escrow process.