You’ve found a home you love, put in an offer, and the seller accepted it. That’s half the battle, but the process isn’t yet complete. There are still some hoops to jump through in order for the deal to close.
The time between offer acceptance and the actual closing date is referred to as the “escrow” process, and many important events typically happen during this time.
The reason for escrow is to ensure that a real estate transaction closes successfully, and in order for that to happen, an escrow company or representative is typically entrusted to handle the deed of the property and the monies involved in the transaction.
Clearly, escrow is very important in a real estate deal. The question is, how long does it take to complete?
How Long Does it Take to Close Escrow?
The real estate escrow process can range a great deal depending on what steps are involved in the deal and how long each step takes. That said, escrow usually takes anywhere between 30 to 40 days.
It can take a lot longer if there are any hiccups in the process, or it can be much faster if some steps are not involved or if everything goes very smoothly.
Generally speaking, escrow involves a number of steps that all play a role in how long escrow will take. These include the following:
Home inspection – Inspections are usually recommended to buyers and are included as a contingency in real estate contracts. This gives buyers the chance to have the home inspected in great detail to see if there are any issues that were not noticed before. If any major problems are identified, this can cause a delay in escrow, especially if the problems are so significant that they take a long time to be rectified before closing can occur.
Appraisal – Lenders will want to have a property appraised to ensure the purchase price agreed upon is in line with the current market. Usually, appraisals come back at or around the purchase price.
Sometimes, however, appraisals come in low, which means the purchase price is higher than the value that the market dictates. If this happens, the lender might refuse to extend the originally requested loan amount, leaving buyers left to either renegotiate a lower price with the seller, come up with the difference, or walk away from the deal altogether, all of which can either delay or quash closing.
Mortgage approval – Appraisals are just one factor that impacts whether or not a mortgage will be approved. Other factors can also come into play. For instance, if the borrower suddenly changes jobs or takes out additional loans, these actions can throw a wrench in the mortgage approval process. In these cases, the process might have to start all over so that approval is based on the borrower’s net income and debt load.
Title search – Buyers will want to make sure that the title is clear of any clouds which could interfere with a successful real estate transaction. In most cases, the title search comes back clean, but instances do happen where liens, encumbrances and undisclosed heirs are identified that were not previously known about. Such issues will need to be dealt with prior to closing. In this case, escrow can be dragged out a little longer.
Document preparation – Specific paperwork will need to be prepared by the lender in regards to the mortgage. Such paperwork is then handed over to the escrow company who will assign an agent to check them over, along with other documentation, to make sure everything is ready for closing. If there is a discrepancy in the documentation, this could cause a delay. Not only that, the escrow company itself might have a backlog of work, which can also contribute to a lengthened escrow period.
While delays can certainly happen, the process can also be a lot faster in some cases. For instance, there are some instances where home inspections and mortgage financing are not part of the equation with all-cash homes purchases from investors who plan to tear down the home and rebuild a new one. In this case, escrow would likely not take very long because a couple of crucial steps have been eliminated.
In the majority of cases, however, escrow is most often closed within the originally stipulated time period that is outlined in the real estate contract. Delays only usually happen if there are unusual or unforeseen situations that were not anticipated. In some cases, a long, drawn-out escrow period can delay closing and may even lead to an unsuccessful deal.
The Bottom Line
The average escrow process takes approximately one month to complete. That said, there may be situations where the process can take longer or shorter. Buyers would be well advised to stay in touch with their mortgage broker and real estate agent who will be in contact with the escrow company. If there are any issues, the escrow company will inform your agent or mortgage broker to keep you in the loop.