If you’re buying or selling a home, you probably want to know when the deal will actually close. One major factor determining this timeline is escrow.
When a seller accepts an offer, an escrow account is opened, and the process continues until closing, when the buyer receives possession of the property. Your closing and moving timeline’s viability depends on how well all the moving parts work together.
Cash buyers can close in as little as seven days if all goes well. However, it usually requires more time, especially if you need to apply for a loan. So make sure you have realistic expectations.
Escrow is a challenging procedure with lots of paperwork and legalese. One of the biggest financial decisions of your life can be made with confidence if you work with an experienced real estate agent who can explain the process as it goes along.
Our friends at Clever are here to help if you’re weighing your options for buying or selling a home. Clever’s licensed concierge team is available to answer your real estate questions or help you find the best agent for your needs.
Put simply, escrow is a financial holding account. When a buyer and seller are negotiating a real estate deal, a third-party provider, such as a law firm, title company, or escrow company, holds and manages funds between them, including things like the earnest money deposit and other fees that are related to the transaction.
Escrow can also be used to describe the procedure, which starts when a buyer submits an offer on a home and ends when the deal is finalized (this is also the time at which the escrow account opens and closes).
Escrow is a notoriously confusing concept, especially for first-time buyers. Fortunately, your real estate agent will guide you through the entire process.
Upon receipt of Earnest Money or within 72 hours after if all pertinent information has been received. Upon receipt or within 24 hours of receipt if all information has been received from Seller and Buyer via their Opening Escrow packages. Within 2 business hours of return after signing.
Why Do Buyers and Sellers Need Escrow?
Buyers put money into an escrow account before a home sale transaction takes place. Before the home sale is completed, the money is kept securely so that sellers cannot access it.
For instance, imagine a family is eager to purchase a lovely home that is for sale in a great school district. They get in touch with the seller, who instructs them to send a check for $25,000 as a good faith deposit to hold the house while they find financing. The money is managed by a third party until the sale is completed rather than being given to the seller directly, who theoretically has the ability to take the money and run.
Escrow can hold more than a cash deposit. It can also house:
Escrow protects buyers from fraudulent sellers stealing their money. Additionally, it safeguards sellers from erratic and unreliable buyers.
When Does Escrow Start?
When a seller accepts a buyer’s offer on a house, the escrow process begins. A good faith deposit, also known as a promise of earnest money, is frequently included by buyers with their offer. It demonstrates their sincere interest in completing the purchase of the property.
The buyers deposit is moved to an escrow account once a seller accepts the offer. After closing, the buyer takes ownership and the money can be released from escrow.
How Long Does Escrow Take?
According to how quickly all parties (seller, buyer, lender, and real estate agents) respond and the schedule for home inspections and appraisals, the escrow process typically takes 30 to 60 days.
Several other factors also influence the escrow timeline:
For instance, disclosures and inspections may take two to three weeks on their own if you’re buying a home in California and waiting for escrow to close.
A knowledgeable real estate agent can monitor the escrow procedure and keep things moving so that the closing date comes sooner.
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Negotiate an Offer Pre-Escrow (1-3 days)
The seller and the buyer bargain and come to an agreement on the home’s purchase price before escrow opens. Theyll also establish any contingencies. Next, they start working towards closing on the sale.
Set Up and Fund Initial Escrow (5-7 days)
The escrow account is where the real estate agent places the earnest money after collecting it. A third-party service provider, such as a law firm, title company, or escrow company, establishes and maintains the escrow account. The escrow company typically charges a fee of 1% to 2%.
Schedule Home Appraisal and Inspections (8-21 days)
To make sure the property is in good condition and worth at least as much as the requested loan amount, the buyer and their lender hire an inspection and appraisal before closing on the purchase.
Typically, the buyer schedules inspections, and the lender schedules the home appraisal. Home safety (foundation, roof, and systems), pests (termites), and environmental hazards (radon, asbestos, lead, and mold) could all be the subject of inspections.
The home is made available to the buyer, and the seller keeps up the utilities so that they can be tested. During this phase, the buyer usually receives disclosures regarding the property, such as historical natural disaster damage, potential environmental hazards, and other issues.
Get Loan Approval (14-28 days)
Before completing the transaction, the buyer must complete a mortgage application. To decide whether to approve or deny the loan, the lender will rely on the home appraisal and the buyer’s eligibility requirements.
The process is over if the buyer is unable to obtain a loan here. Otherwise, the parties move one step closer to closing escrow.
Complete Lender Funding (29-43 days)
The time given by the lender’s funding process gives the buyer time to obtain homeowners insurance. It also includes a title search to confirm that the seller is able to transfer the buyer a free and clear title.
The lender will then start the last phase of the closing process by sending the escrow agent (or lawyer) the final loan documents.
Final Walk-Through andEscrow Funding (5 days)
The last few days before closing are crucial. The buyer visits the property to confirm that it is in the same condition as when they made their offer. The buyer will ensure that any repairs were made if they were requested, as well.
As soon as everything appears to be in order, the buyer and seller sign a Verification of Property form to demonstrate that the buyer had the chance to conduct a final walk-through of the property and was satisfied with its state. Following that, the buyer makes the last escrow payments to pay for the down payment, closing costs, and other fees.
Escrow Closes (1 day)
The buyer and seller will sign a ton of paperwork to complete the property sale on closing day. Following the recording of the deed, the escrow agent releases the funds, and escrow closes.
What Happens if Escrow Doesn’t Close on Time?
You might have to wait it out if escrow doesn’t close on schedule. Home buyers can experience escrow delays due to:
How to Speed Up Escrow
Although buyers may not have much influence over the duration of escrow, there are steps you can take to quicken the process.
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FAQs About How Long Escrow Takes
When a seller accepts a buyer’s offer on their house, escrow begins. Earnest money, also known as a good faith deposit, is frequently provided by buyers with their offer. Escrow begins when the deposit is transferred to an escrow account. Learn more about when escrow starts.
How long after funding does escrow close?
The average amount of time between funding approval and closing is five days. When the property sale is completed at closing, the escrow process comes to an end. After the deed is recorded, the escrow agent releases the funds. Learn more about when escrow closes.
How long is the escrow timeline?
Escrow typically lasts between 30 and 60 days, depending on the speed of response from all parties (seller, buyer, lender, and real estate agents) as well as the time required for home inspections and appraisals. Learn more about the escrow process timeline.
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FAQ
What happens after loan documents are signed?
The escrow agent returns the loan documents to the lender for review after they have been signed. The lender will inform escrow that they are prepared to disburse the loan funds to escrow once they are confident that all necessary documents have been signed and all outstanding loan conditions have been satisfied.
How long does it take to fund a loan after signing docs?
The majority of purchase home loans close and fund on the same day as non-owner-occupied refinances. On the other hand, refinances on primary residences demand a three-day rescission period prior to that (see below for more information).
What happens when loan documents are sent to escrow?
The lender prepares the loan documents and sends them to escrow for signing after the loan is approved, but before the lender receives and approves the loan document conditions. Escrow prepares the estimated HUD1/closing statement for the buyer and gathers any necessary documents that need the buyer’s signature.
What can go wrong after signing loan docs?
The list of things that can go wrong at closing when you buy a house includes everything from problems with the mortgage loan and buyer’s credit to insurance hiccups, appraisal issues, title claims, and unavoidable circumstances (like natural disasters, buyer or seller illness, or death).