How long does escrow take?

The homebuying process can be exhausting and frustrating, so when you finally find a house you love and your offer is accepted, it’s a euphoric feeling. Unfortunately for most homebuyers, that euphoria is fleeting, because now you have to deal with close of escrow.

The closing process doesn’t happen overnight, and one major reason is that the transaction must pass through escrow, the establishment of a third party to support a major transaction.

What is close of escrow?

Escrow is a legal arrangement in which a neutral third party holds assets, documents, or money for multiple parties that are necessary to facilitate a legal transaction. In a real estate deal, close of escrow involves three parties:

• Home seller
• Homebuyer
• An escrow agent, real estate attorney, or title company

The escrow process typically begins after an offer is accepted and involves the buyer providing a good faith deposit to prove they’re serious about buying the home. A seller may also put money into escrow, like to satisfy unpaid property taxes or credits offered to the buyer as a condition of the home sale.

When both parties have satisfied all the conditions of the purchase agreement and the escrow agent has all documentation necessary to move forward, then close of escrow has been reached. It’s at this point that both parties sign closing documents, including title forms, the deed of trust, and any associated paperwork, and the buyer officially becomes the new owner.

You don’t have to go through escrow, but it’s necessary in most real estate transactions. In most cases, buyer and seller don’t know each other personally, so escrow offers a neutral party to facilitate a huge financial transaction and ensure that all parties satisfy the terms of the agreement. Sales between people who trust one another or all-cash offers may be able to avoid escrow.

One important distinction to note: Close of escrow refers to the escrow account you set up during the closing process. Most homebuyers using a mortgage will pay part of their monthly mortgage payment into another escrow account set up with their lender to satisfy property tax and homeowners’ insurance costs. When you sell your home, you’ll go through close of escrow with this account, too.

Escrow closing process timeline

After a seller accepts an offer, the closing process begins. Escrow closing is the first step in this process.

1. Purchase agreement is signed

Both buyer and seller sign the purchase agreement, demonstrating willingness to carry out the home sale.

2. Buyer provides earnest money deposit

After signing the purchase agreement, a buyer provides an earnest money deposit that an escrow agent deposits in the escrow account. This functions almost as a security deposit and, if you’re using a mortgage, represents a percentage of your down payment to the lender.

3. Buyer approves seller’s disclosures

The Seller’s Disclosure is a legal document that details the property’s condition and discloses any known defects or previous damage or problems that house has experienced. This isn’t required in every state, however, so it’s important for all buyers to follow the next step.

4. Buyer orders an appraisal and inspection

In competitive markets, many buyers wind up waiving their right to a home inspection. While it might be a necessary sacrifice to get a home in highly desirable areas, it’s never advisable to waive an inspection. A home inspection gives the buyer an opportunity to ask a seller to fix any issues found and, if issues are very significant, demand a discount on the price or walk away from the sale entirely if you included a home inspection contingency in your purchase agreement.

While inspections may not always happen in today’s market, most lenders do require home appraisals before finalizing the mortgage agreement. This appraisal helps lenders determine the real value of the home, ensuring that they aren’t approving a loan amount that’s higher than the property’s value. If that is the case, you may have to find a new lender or accept less favorable terms.

5. Buyer and seller review all escrow documents

Once both parties are satisfied with the inspection and appraisal process, both buyer and seller will review all escrow documents. These may include the transfer deed, bill of sale, seller’s affidavit, signed mortgage deed, mortgage application, and Closing Disclosure. Many states require both parties to enlist the help of a real estate attorney, but if your state isn’t one of them, it’s still advisable to look over documents with an attorney or real estate agent.

6. Final walk-through

The last step before going to the closing table is the buyer taking one last look at the property. This is a final chance to check for any new damages, and ensure the seller has left what was agreed on (like appliances) and removed everything else. Usually, you can’t back out of a sale after a final walk-through unless you discover major damage that wasn’t previously disclosed. You can, however, attempt to renegotiate or withhold funds if you find something very concerning.

Learn what buyers can demand after a final walk-through.

7. Closing time

Finally, it’s time for the closing table. Different states have different closing processes, and it may or may not be necessary for the buyer and seller to both be present at the same time. Depending on the state, a representative of the lender, a closing agent, real estate agents, and legal representatives may all be present.

The actual closing process usually takes about an hour and involves signing documents like title forms, transfer of tax declarations, the initial escrow statement, the deed of trust, mortgage-associated paperwork, Closing Disclosure, and proof of insurance. Buyers will also need to have the final amount prepared to pay the rest of the down payment and closing costs. (This can often be done virtually today.)

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Finally, the deed can change hands.

Is escrow closing the same as your closing day?

The entire closing process usually takes between 30 to 60 days, but can be done as quickly as 15 if all parties are aligned and agree upon an expedited timeline. Close of escrow may or may not happen on the actual closing date. Sometimes, both parties have satisfied all terms ahead of the closing data, so close of escrow happened before the closing date. In some states, there’s a small lag between signing closing documents and officially transferring title, which may cause the close of escrow to lag a day or two. Generally, however, escrow closing is the same day as your closing day.

Why is my escrow taking so long?

There are several reasons why close of escrow — and, therefore, the closing process — can become delayed. Indeed, the whole point of escrow is to give both buyer and seller peace of mind that they’re absolutely positive about this major transaction.

Some common hiccups that can delay close of escrow include:

• Delayed appraisal or inspection
• Inspection, appraisal, or home sale contingencies not being satisfied
• Missing paperwork or essential closing documents
• Title issues, like a lien on the property for unpaid taxes

What documents do you need for escrow closing?

While paperwork varies between states, you’ll generally need the following documents for escrow closing, all of which should be provided and completed by your lender, attorney, or real estate agent:

• Copy of loan application
• Home appraisal report
• Initial escrow statement
• Affidavit of title
• Deed
• Bill of sale
• Closing Disclosure

With all of these documents present and signed, you’ll be able to smoothly sail through close of escrow and start planning your life in your new home.