If you’re thinking of, or are in the process of, buying property, it’s critical that you understand each step of the journey and how long it’ll take. One crucial but oft-misunderstood aspect of purchasing property is the escrow phase. Read on to ensure you know exactly what is involved and the necessary time frame.
What is escrow?
Escrow occurs when you put money into an account that’s managed by an impartial third party. In real estate, escrow is meant to protect both the buyer and the seller. The money is held until all contractual conditions have been met.
How long does escrow take?
Escrow takes an average of 30–60 days to complete, but the process may take longer if either the buyer or the seller has responsibilities that need to be filled as part of the purchase agreement. For example, the seller might have to make repairs and/or go through another home inspection before escrow can be completed. Delays can also occur if issues such as a legal judgment or lien arise during the title search
, or if the escrow company is overwhelmed and needs more time.
What is the escrow timeline?
When negotiating a contract, the buyer and the seller will agree on an escrow timeline. Escrow begins when a seller accepts an offer to purchase a property and signs the purchase agreement (Day One). Between Days Two through Five a portion of the down payment—also known as an earnest money deposit—is put into an escrow account.
After the deposit is made, inspections occur and the buyer will receive disclosures about the property. At that point, the buyer and seller can negotiate based on what is revealed by the inspection. Once a final purchase price has been established, the buyer will secure money for the purchase (if financing) and go through the closing process.
During the final five days, the close of escrow occurs. The buyer will do a final walkthrough and pay the remainder of the down payment, as well as closing costs, to the escrow agent. The deed will be recorded, the funds will be dispersed, and the closing will be finished.
The buyer will be able to move into their new home knowing they did their due diligence and found a property they absolutely love.