Buyer Escrow Timeline - What to Expect from the Process
October 14th, 2022
Buying a new home is one of life’s little joys… until you’re faced with an array of mind-boggling entanglements of the biggest investment of your life to keep up with. Although the escrow timeline is pretty straightforward, it often confuses first-time home buyers.
On top of all the tasks this life-changing step adds to your to-do list, the last thing you want is to get stuck trying to figure out all the complexities and deciphering confusing legal jargon you may stumble upon while trying to fit all the pieces of the escrow timeline puzzle together.
Luckily, we’ve gathered key information and insider tips and tricks under one roof to help you prepare. Knowing what to expect from the process will help you navigate the escrow timeline when purchasing a home with ease.
What Is Escrow and How Does It Work?
In simple terms, escrow is a legal arrangement in which an impartial third party (the stakeholder or escrow agent) temporarily holds money or property (on an escrow account) while negotiating a real estate deal until all contractual conditions, such as the fulfillment of a purchase agreement, have been met.
Escrow services are usually mandatory in a home purchase as they show the seller that the potential buyer is serious about buying the home and ensure taxes and insurance premiums get paid on time.
Why Do You Need Escrow When Buying a Home?
Escrow is important because it acts as a “vote of confidence,” resulting in peace of mind for all included. In real estate, escrow is a gesture of good faith - a “mediator” that reduces risk on both sides of a transaction, ensuring all parties involved are protected. In the case of buying a home, it would be the sale, purchase, and ownership of a home.
As a home buyer, escrow gives you leverage, knowing that if the deal falls through due to failed contingencies listed in the contract, you will get your earnest deposit back. You’re taxes and insurance will be dealt with through monthly payments, so you won’t pay them in big lump sums or fall behind.
Buying a Home Timeline from the Escrow Perspective
First things first: What is the escrow timeline, exactly? When negotiating a purchase contract, the home buyer and the seller will agree on an escrow timeline, which can vary depending on numerous factors we will explain in more detail below. The term “escrow timeline” itself refers to the time frame and events between signing the contract and closing the deal.
But, before we dive any deeper into the nitty-gritty of escrow timelines, let’s break it down to ease you into it – have a sneak peek into the key steps of the home buying escrow process:
Step 1: Offer & Escrow Account
The buyer and seller agree on a purchase price and escrow timeline, putting the escrow process in motion.
Step 2: Making a Deposit
The buyer’s earnest money (“goodwill deposit”) is transferred into the newly opened escrow account.
Step 3: Disclosures, Home Inspections & Appraisals
While inspections take place, the seller fills out and signs disclosures about the property as mandated by state law to outline any faults the property has. If the buyer’s offer includes an appraisal contingency, somebody will also come to visit and inspect the home for property appraisal.
Step 4: Repairs & Negotiations
Any negotiations or requests resulting from the completed inspections and appraisals now take place, like fixing an issue by doing the necessary repairs or negotiating the property price reduction to compensate.
Step 5: Contingencies
This is when contingency releases that involve signing all necessary paperwork are handled. Once a decision has been reached, the buyer signs the inspection results, thus removing their inspection contingency.
Step 6: Mortgage Process & Loan Approval
This is when the home buyer submits a mortgage application and waits for the mortgage loan to be approved by their lender (directly or through a mortgage broker) to be able to secure the funds for closing the purchase.
Step 7: Title Searches & Title Insurance
The Title Company runs a title search to ensure the seller provides a clear title to the buyer, and the buyer may secure title insurance. Finally, the buyer’s mortgage lender sends the final loan documents to the escrow agent.
Step 8: Finalizing the Deal
An optional walk-through is offered to the home buyer to ensure the property is in the state agreed-upon state. If all goes well, the magic happens, and the escrow timeline closing is complete!
Connecting the Timeframe Dots: What to Expect from the Escrow Process Timeline
If you’re a first-time home buyer, you may not have a clear picture of what the escrow process actually looks like.
Keep reading to find out what happens next in the escrow timeline and how it all works, so you know what to expect and prepare for your personal home buyer timeline in advance.
When Does Escrow Start?
The escrow process begins when a seller accepts a buyer’s offer to purchase a home, signs the purchase agreement, and an escrow account is opened. Home buyers often back their offer up with an earnest money deposit to show they’re serious about following through with the purchase. The funds are put into the escrow account, where the they remain until closing, after which they are disbursed.
How Long Does Escrow Take?
There is no standard escrow timeline the process must follow. Typically, the escrow process takes between 30-60 days to complete on average and will probably fit somewhere within this timeframe if all goes well. The escrow process timeline largely depends on the purchase agreement, how quickly all parties (seller, buyer, lender, real estate agents, loan officers) act, and the home inspection and home appraisal timeline.
- The escrow timeline can vary due to various factors determining the length of escrow, including:
- Mortgage pre-approval
- Time requirements for all the tasks
- Preparing the proper documents
- State requirements for escrow
- The time it takes to get the underwriting done, and more.
Simply put, more complicated transactions can take longer to close, and more straightforward transactions can be sped up. In most cases, escrow can be closed successfully within the agreed-upon time frame specified in the contract. However, if the process lasts longer than this timeframe, it might be indicative of some mishaps that have delayed closing and prolonged the escrow timeline, such as failed inspections or legal issues that arise during the title search.
What Is The Escrow Process Closing Timeline?
“How long after escrow closes can I move in” is one of the most common questions we get. As a home buyer, you’re probably eager to find out how long it will take for the keys to your home to fall into your hands officially, and this is primarily affected by the escrow timelines. The escrow process timeline officially ends when the sale of a house is complete, and the home buyer takes possession at closing.
During the final five days, the close of escrow takes place. After the home buyer covers the remainder of the down payment and closing costs that are due (loans, liens, and Vendor bills) and both parties sign all documents relating to the sale, the deed will be recorded, the funds will be dispersed, and the closing will be finished. The escrow company will then update the status to reflect the transfer of ownership, making it the final step in the escrow process. The buyer then gets the keys, and the seller receives the money from the sale.
What Happens If Escrow Doesn’t Close on Time?
Nobody wants their escrow timeline to drag on longer than it should, but sometimes you can run into some bumps on the road. Although unpleasant, there are no penalties if an escrow process does not close on time unless the contract has no stipulations regarding the closing timeline. However, the purchase contract will expire, meaning the parties are no longer under contract. Asking the seller to extend the closing date is typically the next step, but they must agree.
Some of the possible reasons that might delay the escrow process and stop it from closing timely are unorganized and late-scheduled inspections and failure to locate and provide the required documentation. It can also simply be the result of a slow and inefficient escrow service provider.
Therefore, addressing all potential challenges before they arise is important to ensure a seamless closing process. In order to speed up your escrow process timeline as much as you can as a home buyer and avoid any hiccups down the road, ensure you hire a reliable and trusted escrow company and inform yourself about the necessary paperwork you should prepare in advance.
What Is the Shortest Time for Escrow?
You might be wondering what the shortest escrow possible is. If everything goes smoothly, home buyers purchasing in cash can close the escrow process in as little as 7-14 days (one to two weeks). However, it’s important to have realistic expectations since the average escrow timeline is usually longer, especially if you have to apply for a loan.
What Is the Shortest Time for Escrow?
You might be wondering what the shortest escrow possible is. If everything goes smoothly, home buyers purchasing in cash can close the escrow process in as little as 7-14 days (one to two weeks). However, it’s important to have realistic expectations since the average escrow timeline is usually longer, especially if you have to apply for a loan.
The California Escrow Process Timeline: How Long Does Escrow Take to Close in California?
Maybe you’re reading this because you’ve just made an offer on your dream home in the South Bay. If so, congrats! If you’re a home buyer thinking about living their California dream and buying a property, you’re probably wondering how the escrow timeline works along the golden coast.
The truth is, things aren’t much different in California when it comes to the escrow closing process – just like in most US states, real estate escrow processes take around 30-40 days on average.
Speed Up The Escrow Timeline Without Sacrificing Quality
Escrow is a complicated process, full of deadlines, legal terms, and documents to cut through. Coordination of all the moving parts of the escrow process can make or break your closing and moving timeline. We make it a breeze.
With an experienced, reliable, and efficient escrow company like Lightspeed Escrow in your corner to clarify the escrow fees and guide you through the process every step of the way, you won’t have to think twice about hitting the 30-day escrow timeline mark.
Feel free to reach out to get an answer to any question you may have, or hire our fast, quality, and secure escrow services to walk you through one of the biggest financial decisions of your life and close your real estate transaction at the speed of light.