Important takeouts:
Escrow serves as a neutral intermediary period during real estate transactions. Third parties will oversee important documents, funds and terms until the sale is officially completed. As a seller, you are responsible for disclosing known issues, allowing inspections, and responding to the buyer’s requests. General contingencies such as funding, inspections, and assessments can affect your timeline, so staying active and communication is key to avoiding delays.
You have accepted the offer in your home – so how does escrow work when selling a home? In real estate, escrow is a neutral retention period in which a third party controls key documents, funds and terms until the sale is finalized. As a seller, you work through disclosure, inspection, and buyer contingencies while meeting important deadlines during this process.
Whether you’re selling a home in Sacramento, California, Colorado, or Tampa, Florida, or Sacramento, California, this Redfin Real Estate Guide will explain how escrow works when selling a home, what your responsibility is, how long it usually takes, and how to pass the key with confidence.
What does escrow mean when selling a house?
In real estate, escrow is the period between an accepted offer and a closure, during which a neutral third party (usually a title company or attorney holds important documents and funds. This ensures that both the buyer and the seller meet the agreed terms before the transaction is completed.
The property is held in escrow, but buyers and sellers function through disclosure, inspection and final negotiations. The exact process may vary depending on where you live. For example, in New Jersey, lawyers are more involved, but in other states such as California and Florida, title companies handle most of their escrow liability.
How long does escrow take when selling a house?
The escrow process usually takes 30-45 days after the offer is accepted into closure. However, the time-consuming depends on the details of the sale and how quickly a particular step is completed.
These factors can affect the time it takes to escrow.
All parties (buyer, seller, agent, lawyer) that may affect the search and resolution of the lender’s final approval title, including the certificate of occupancy requirements outlined in the purchase agreement, including the purchaser’s funding, the current home valuation scheduling and selling results.
What should a home seller do during escrow?
Once you’ve entered escrow, you need to manage your critical responsibilities to keep your sales moving forward. These tasks are designed to ensure transparency, ensure due diligence and resolve any issues that may arise before closing.
Disclose material facts regarding the property
As a seller, you are legally required to disclose known material defects that may affect the value and safety of your home. Requirements vary depending on the condition, but often cover issues such as roof leaks, flooding, and unauthorized work.
In California, sellers must complete a forwarding disclosure statement (TDS). Federal law also requires disclosure of lead paint in old homes. By following these rules, you will protect against liability and keep the escrow process on track.
>> 40 Real Estate Form You Need to Sell Your Home
Allow access to the home for inspection
As a seller, you must provide access to the property for inspection of your home during escrow. Additionally, you should be able to deal with inquiries regarding the condition of your home, recent repairs, and systems such as HVAC and plumbing.
Be prepared for possible negotiations
If the inspection reveals the issue, the buyer may request a credit upon repair, low price, or closing. You should review these requests and negotiate the terms and conditions that are comfortable with the buyer. Maintaining open communication and being open to compromise is key to moving forward with sales.
How common escrow contingencies affect you as a seller
As a seller, it is equally important to understand the buyer’s obligations. Most purchase agreements include contingencies for financing, inspection, or evaluation. These binding terms protect the buyer and establish deadlines that the seller must meet.
Failure to meet these deadlines may provide buyers with a legal basis to cancel the transaction. Consult your agent or real estate attorney to understand all the timelines and terms outlined in the contract.
Funding contingency
This protects you by allowing buyers to back out if they can’t secure a mortgage. This means that the sale will not be final until the buyer’s loan is approved. To minimize delays, we encourage buyers to be approved in advance before making an offer and to stay in touch with lenders throughout escrow.
What happens if the buyer misses the deadline for his loan commitment?
Work with agents to assess whether a short extension is valid. If delays are excessive and are not justified, you may have the right to cancel your contract and relist your home.
Unforeseen circumstances of inspection
This usually involves this contingency in which the buyer inspects the property and requests repairs if a problem occurs. As a seller, be prepared to provide access to the inspection and consider conducting a pre-examination before listing. This helps identify problems early and reduce the risk of derailing your transaction.
What happens if the roof is revealed that the inspection is missing?
Buyers may request repairs, closing credits, or price reductions. Providing credits is faster, faster and less complicated than managing repairs, especially if you have a tight timeline. Agents help you decide on a fair response based on quotes and local market norms.
Evaluation contingency
The lender needs an assessment to ensure that the value of the home matches the loan amount. If the rating is low, the buyer may ask to lower the price or make a concession. To prepare, carefully research the value of the local market and price your home realistically to avoid valuation issues.
What happens if the valuation falls below the agreed price?
You need to decide whether to lower the price, split the differences, hold it tight and risk the buyer leaving. Agents can use recent comparable sales and buyer motivations as leverage to guide them.
>>What is the rating gap? How does it work?
What to expect when escrow closes at your home sale
Once escrow closes, the sale is recorded with the county and ownership is transferred. You could hand over the key to the buyer’s agent, cancel the homeowner’s insurance, potentially collecting sales revenue through Wire or checks. Make sure to keep a copy of the closed documents for future tax purposes.
Seller’s take-out: Smooth escrow
The escrow process may feel like you’re at the finish line, but it can often be an unexpected obstacle. If you are wondering how escrow works when selling your home, it is important to understand your role at this stage.
As a seller, your communication and flexibility is important to help you move things forward and secure your sales. Knowing what to predict and what is expected will help prevent delays when handing over the keys and ensure a seamless transition.
FAQ: How does escrow work when selling a house?
1. Can a sale fall on escrow?
yes. Escrow sales can collapse due to poor ratings, seller rejection to fix inspection issues, or property that does not receive a certificate of occupancy from the local building department.
2. What happens if a buyer misses the deadline during escrow?
A missed deadline from a buyer can provide the opportunity to delay the conclusion or cancel the contract, depending on the terms outlined in the purchase agreement.
3. How should I be involved in the Escrow Company or the Title Company?
Your primary interactions with the Escrow or title company include reviewing and signing the document, submitting necessary disclosures, and arranging fund transfers. Agents usually help manage these interactions and ensure a smooth process.
4. Is there a risk to the seller if escrow takes longer than expected?
If escrow takes longer than intended, this can increase the cost of carrying around, such as mortgage payments, utility services, insurance, and more. Also, maintaining aggressive and responsiveness can minimize delays and their impact, as it can create uncertainty.
5. If I have accepted escrow and find a better offer, can I cancel escrow?
Once escrow begins, there is a general legal obligation to complete the sale. You can only back out if the buyer allows cancellations in a default or emergency. Retreating without a valid reason could lead to legal consequences and serious money confiscation.
