You’ve received the great news that you’re in escrow! But what exactly does this mean? Escrow refers to “a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition.” (Merriam-Webster.com)
You’ve purchased your perfect home, you’ve extended an offer, the seller has accepted your offer, you’ve transferred your earnest money, and you’ve signed the contract. Now you’re in escrow. Simply put, escrow refers to the process where the buyer and seller deposit money and the real estate contract with a neutral third-party, the title company, until the conditions are met for a real estate transaction. Here in Arizona, the escrow process is provided by a title insurance company, in most cases, instead of an attorney as is required in other states. So, in Arizona, title companies handle both the title and the escrow part of a transaction.
The title company begins to “vet” or research the buyer, seller and the property itself once escrow is “opened”. This is so the title company can issue title insurance. So, when the real estate transaction is “in escrow”, the real estate contract, along with any earnest money, has been presented to the title company. Also, the title company has opened a file with the names of the parties in the contract. This real estate transaction stays in escrow until it is “out of escrow” by closing the transaction according to the contract terms. If something goes wrong such as the buyer doesn’t qualify for the loan, the transaction will fall out of escrow.
Why do we even need escrow? Whether you are the buyer or seller, you want the assurance that no funds or property will change hands until all of the transaction instructions have been followed. The title company (ie, escrow holder) has the legal obligation to safeguard all funds and documents during their possession, and to convey title and/or disburse the funds only when all provisions have been met.
The length of the escrow process can range from a few days to several months, depending on the terms of the purchase agreement. Generally speaking, the Deed of Trust is recorded within one business day of the title company’s receipt of loan funds, signaling the “close of escrow”. The escrow officer will verify with the local records office that the documents have been recorded and legal transfer has been made from seller to buyer.
We hope this brief summary has simplified this common real estate term. Every transaction is different, of course, but we look forward to helping you navigate your own home-buying process.
click HERE to get a free, no-obligation home value estimate.