If you’ve ever purchased a home, you’ve encountered escrow: the period between the acceptance of your offer and deposit of your earnest money and the final closing of the buyer-seller-lender transaction. The escrow period can range from weeks to months—depending on the lender’s timetable and the desires of the seller and buyer—and can be a bit confusing if you don’t understand what’s going on. While you can always ask your real estate agent to keep you informed on your escrow’s progress, the following details may also help alleviate uncertainty.
The Parties Involved
Multiple parties are involved in the escrow process and include your real estate agent, the sellers’ real estate agent, your lender, a title agent and an escrow agent.
- Your real estate agent is there to guide you through the process, much as the sellers’ real estate agent will do for them.
- Your lender takes your mortgage application and verifies all the important details before putting it through underwriting.
- The title company makes sure the title to the property you are buying is free of liens and judgments. It also issues title insurance to protect you and your lender from any future property claims or disputes.
- The escrow agent serves as a neutral third-party officer. He or she coordinates the escrow process, ensures it follows the terms of the purchase contract, and handles all of the paperwork.
Basic Escrow Timeline
While the actual timeline of any escrow may change due to a variety of factors, the basic steps involved in the process are as follows:
- A realtor submits the purchase and sale agreement to the escrow agent.
- The escrow agent sends instructions to the buying and selling parties, requesting more information about the transaction if necessary.
- The escrow agent contacts the title agent and asks for a title search on the property.
- The title agent conducts a title search and notifies the escrow agent of any issues.
- If there are title issues, the escrow agent will work to clear them from the title.
- The lender sends the completed loan document to the escrow agent.
- The escrow agent prepares a settlement statement that reflects the costs of the transaction including loan fees, escrow fees and title fees.
- The escrow agent prepares other documents the parties will need at closing.
- The escrow agent coordinates a closing date.
- The buyer, seller, escrow agent (and sometimes the buyer/seller real estate agents) meet to sign the closing documents.
- The buyer gives the escrow agent a money order for any transaction costs that are not included in the loan amount.
- The escrow agent sends copies of the signed loan documents to the lender.
- The escrow agent sends the deed or deed of trust to the title agent.
- The lender reviews the documents and approves them.
- The escrow agent communicates this approval to the title agent.
- The title agent records the documents (this is when the transaction is officially closed).
- The lender wires the funds for the property purchase to the escrow agent.
- The title agent sends the escrow agent a recording number indicating he/she has recorded the documents.
- The escrow agent disburses the purchase funds to the appropriate parties.
- The escrow agent sends a final settlement statement to the involved parties.
The escrow process is best navigated by a licensed real estate professional who works with lenders, title and escrow agents on a regular basis. Few experts would advise that a homebuyer tackle it alone. Fortunately, I’m here to help! Give me a call if you have additional escrow questions or have been thinking about buying, selling or investing in real estate.
