How Long Is A House In Escrow?

Buying a house is an exciting but daunting process. Once you’ve finally found that perfect place, the wait until you can call it your own often seems interminable. But then it happens. You put in an offer, the offer is accepted, and – you enter something called escrow. What?

The escrow process, also known as closing, is that time between accepting the offer and getting the keys. For first time Buyers, it can be a confusing period, and a time filled with tension. Before you start the process, it’s important to understand what escrow is, and how long it takes.

On average, a house is in escrow for 30 to 60 days. During this period, the Buyer is able to secure loans, funding, and inspections.

The escrow period should be agreeable to both the Buyer and the Seller. Escrow is different for each Buyer, but this guide should help you to understand what it all means.

What Is Escrow?

Escrow is a financial service conducted by a neutral third party on behalf of the Buyer and Seller. The escrow agent will hold the deposit (otherwise known as the earnest money) given by the Buyer, while the Seller takes the house listing off the market.

While in escrow, the Buyer has the opportunity to complete obligations such as securing a mortgage, completing house inspections, and buying insurance.

How long escrow lasts for is determined by how long these processes take to complete. This varies from sale to sale, and is also influenced by the laws of the state.

Escrow is a sort of waiting period, in which all the final details are secured.

Although it’s impossible to know exactly what your escrow period will look like, there are certain similarities between each process.

Opening An Escrow Account

The escrow account is opened when the Buyer and Seller have come to mutual agreement over the purchase of the house.

The escrow agent, a neutral third party, will collect the earnest money and any relevant documents. Throughout the escrow process, the agency acts to collect all the necessary documents relative to the sale. Escrow typically begins the day after the offer is accepted.

Inspections And Appraisals

Once the escrow account is open, the first step is completing inspections and appraisals. The bank or lender will require an appraisal, and the Buyer should consider paying for their own inspection. There are several types of inspections:

  • Lender appraisal inspection. This appraisal is carried out by the lender, at the expense of the Buyer. The lender appraisal is necessary if you’re taking out a mortgage, to protect the lender if there’s a foreclosure on the property.
  • Home inspection. The Buyer organizes a home inspection to check for any issues that could be costly, or potentially dangerous. If the home inspection finds major faults, the Buyer can either back out of purchase, negotiate a lower price, or negotiate repairs.
  • Termite or pest inspection. During a home inspection, you may be alerted to a pest issue. However, it’s worth paying a few hundred dollars extra to get a separate pest infection. Payment for this should be negotiated with the Seller.

Other inspections, such as a geological inspection, an agent visual inspection, or a hazard inspection, may also be required depending on the property. Although inspections may seem a frustrating delay, they’re necessary to prevent future disasters.

During this first week, the Seller will also release any disclosures. These will notify the Buyer of any issues or defects with the property. Some of these may have been discussed in the listing, or during the offer process.

When inspections are complete, it may be necessary to negotiate for repairs. These will be at the expense of the Seller. Repair requests will begin in week two of escrow.

Securing The Loan

With the inspections complete, we move into the decision-making escrow period. The Buyer is likely to already be pre-approved for a mortgage by this point in the sale.

Once the lender has completed the appraisal, they may wish to renegotiate the loan. If the appraisal determined the property was worth less than the sale price, the Buyer may need to pay the difference, or the Seller can lower the price.

With this decided, the lender will prepare a statement detailing the loan. This will cover the amount of the loan, the interest rate, and other associated costs.

Contingency Release

With the appraisals completed and the disclosures reviewed, the next step is to sign the contingency release. This will occur in roughly week three of the escrow process. Contingency releases often consist of a lot of paperwork.

By this point, any repairs should be close to completion.

Insurance

Within this time period, the Buyer will also need to seek home insurance, complete a title report, and buy title insurance. This will often be required by the lender before a loan can be secured.

Final Walk Through

With funding secured, inspections complete, and everything ready to go, the Buyer has a final opportunity to walk through the home. This inspection is just to ensure that the house hasn’t been damaged since the offer was accepted.

At this point, barring major issues, it’s difficult to withdraw from the sale.

Close Of Escrow

Close of escrow is mostly signing a lot of paperwork before the deed is transferred to the new owner. The Buyer will pay the down payment and any closing costs, and the lender will pay the Seller. The Buyer will then get the keys, and the sale is complete.

What Can Delay Escrow?

Ideally, escrow will be a quick and painless process. However, there are always potential delays. Inspections can take a while, especially if they aren’t organized well.

Longer repairs or drawn out negotiations may also delay the process. Make sure to have all the necessary documents prepared, as locating the right paperwork can cause escrow to drag on.

Summary

Escrow typically takes between 30 and 60 days. During this process, the inspections are completed and funds are secured. When the escrow period is closed, the ownership of the house is transferred.

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