You studied your options for home loans carefully, selected the best form of financing for your unique needs, and worked with your lender to secure preapproval. You made lists of the things that you wanted and needed in a home and scoured the real estate listings to find houses that offered the right mix of both. After touring a multitude of different places, you found the ideal house, enticed the seller with a competitive offer, and celebrated when you learned that your efforts had paid off. What happens now that the seller has accepted your offer? Welcome to the escrow process. So what is escrow? And how long does escrow take?
The Road to Closing
What is escrow? Who participates in it? What do they do? How long does escrow take? How much does it cost? If thinking about escrow has left you with more questions than answers, don’t panic. Escrow is a fairly simple process that occurs during virtually every home sale.
Escrow may sound somewhat exotic to those unfamiliar with the term, but it is a normal part of the preparation for closing on a home.
Escrow is the process of having a neutral third party hold onto something valuable until a sales transaction is completed (source). Whether it’s a title company, escrow service, or real estate lawyer who’s tasked with the job, their role in your home purchase is clear: They serve as the referee who makes sure that everyone involved in the sale follows the rules. Escrow officially begins after the sales agreement is signed and your earnest money is deposited. That money doesn’t go to the seller; instead, it’s held in escrow until all the terms of the bargain are fulfilled and a closing is held to finalize your purchase.
Who Does What During Escrow?
While the escrow service may have the starring role, a variety of individuals and organizations take part in the escrow process, including the buyer. Nolo identifies the following parties as the major players:
- The Entity Providing Escrow Services: In addition to holding the funds safely, this organization will begin preparing title reports, property deeds, and other vital paperwork.
- The Lender: Before finalizing the approval of your loan, your lender will arrange for a professional appraisal of the home and dive deeply into the underwriting process.
- The Buyer: You’ll need to arrange for any inspections, secure homeowners insurance, and work to meet any necessary contingencies. You’ll also want to stay in close communication with both your lender and the escrow service to help minimize any delays.
- The Seller: The seller will be expected to make the property available for various inspections, prepare the relevant disclosures, provide any needed documentation, and work to meet any contingencies of the sales contract.
Time, Money, and Escrow: How Long Does Escrow Take?
How long does escrow take? Framework reports that it usually takes at least 30 days, but the answer can vary depending on the particulars of your situation. What about cost? While your earnest money will be applied to the final cost of the sale, there is also a price tag for the services provided during the escrow process. According to ValuePenguin, escrow services generally cost between 1 percent and 2 percent of the property’s purchase price. As for who pays escrow costs, that’s something that can be negotiated between the buyer and seller.
If you have questions about financing a home purchase, refinancing your existing home, or the processes involved in getting the job done, turn to the experts at PrimeLending Kansas City. We’re committed to helping you navigate the home financing process with confidence. Contact us today to learn more about our services and how we can assist you in your pursuit of your homeownership goals.