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What Is Escrow?

Escrow is another one of those complicated real estate terms that you’re not really sure what it is or what it means until you actually have to use it. If you’re a first time home buyer, you may have absolutely zero clue what the heck an “escrow” is at all. Escrow is a sort of liminal space in the home buying process, where deals and transactions are frozen in time while you sort everything out. Zillow defines it as: “when an impartial third party holds on to something of value during a transaction.” You may be thinking ‘Okay, well, it still sounds complicated.’ And don’t worry, it is complicated. That’s why we’ve written this article all about escrow: what it is, how it works, why it’s needed, and how long the process takes. Let’s jump right into it!

Escrow in detail

First, it should probably be noted that regarding mortgages, “escrow” and “escrow accounts” are two separate concepts. Escrow is the process in which a neutral third party mediates the transactions in a real estate deal, keeping money and property “in escrow” while the two parties negotiate. Then, once both sides come to an agreement and the conditions are met for the sale to close, the funds are released and allocated to their respective rightful owners. 

An escrow account on the other hand, is an account that helps manage a mortgage borrower’s annual tax and insurance costs. Homeowners will typically pay money into this escrow account on a monthly basis, and then the lender can automatically pull the required funds for associated real estate fees so that the homeowner doesn’t have to worry about it. An escrow account is usually automatically created by the bank or direct mortgage lender that you secure your mortgage from. By having this account in place, it reduces the risk of the homeowner falling behind on payments to the government or insurance provider, so it’s a kind of safety net in that sense. 

Though escrow and escrow accounts have different definitions, both of these have one consistent element in common: escrow is a way to store funds for safekeeping until they are needed to serve their intended purpose, whatever that may be. 

How do escrow accounts work?

escrow in closing

As we mentioned earlier, an escrow account is established when you obtain a mortgage loan from a bank or direct lender for the purpose of helping you keep up to date with your property taxes and homeowner’s insurance premiums. Because these fees are owed on an annual basis, it can be easy to forget about what you will inevitably owe by the end of the year. This is why an escrow account is helpful, because you have an established amount to be paid monthly into the account to accumulate, that will cover all of those annual costs so that you aren’t taken by surprise.

Downsides of escrow accounts

Escrow accounts are in place to keep you on track as a homeowner and to ensure that the bank or lender is protected as much as possible when it comes to annual fees. There is a mutual benefit to these accounts, which takes a lot of pressure off of everyone involved. However, unfortunately this setup does not come without drawbacks. One of these is that lenders typically require you to maintain a minimum balance in your escrow account to protect against unexpected increases in cost. This evens out to be around two months of expenses on your mortgage escrow account. Although, depending on how “risky” your mortgage is considered to be, the limit could be even higher. Lenders will review your account once a year to ensure that the calculated payments are aligned with the costs.

Buying a home and escrow 

Now we’ll talk more about escrow in regards to property transactions and transfers. When buying a home, the process begins when you make an offer. When you make an offer on a home, you will write an earnest money check that will go straight into escrow. Again, this means it’s not going straight to the seller, but rather it is being held by the impartial third party until negotiations wrap up and you’re able to finalize the contract and close the deal. This way, the seller can see that you have the money for the home, and that it will be ready to be handed over if they accept the offer. This also proves that you are serious as a buyer and have the cash to back it up. 

Neither party can access the money while it is in escrow. This protects the prospective buyer and the seller, because if the offer money was sent to the seller right away and you were unable to come to an agreement on terms of sale, the seller could hold the money hostage to get a leg up in negotiations. And on the other hand, a seller wouldn’t want to accept your offer without knowing for sure that you could pay for it. And there’d be no way they’d want to sign over the deed to the home until you’ve written up and sent the check. Escrow ensures that every party involved gets what they need, when they need it. This makes for a smooth, easy closing on the home. 

When the purchase of the home is completed, this will lead to a closing of escrow. This closing is essentially the final step in the closing process when the purchase is completed. When this occurs, a closing or “escrow officer” (often times an attorney) will oversee the final paperwork and allocate the funds to their respective deserving parties. They are also in charge of recording of deeds. They will make sure that all of the money is disbursed properly, that all necessary documents are signed and recorded, and that all the closing conditions are met before officially closing the escrow.

Escrow fees

When going through the home buying process, paying escrow fees will be part of the deal. Typically, these services for a home purchase will run you anywhere from 1–2% of the final price. Considering the national median home value is around $226,800, this could be $2,000 to $4,000, which will be tied in with your other closing costs. But there’s some good news: the fees are totally negotiable. You can ask the other party to cover part or possible all of the escrow fees, which they may be inclined to do in order to close the deal quicker. 

If you are purchasing the house, you will need to deposit 1–3% of the final sale price into a joint escrow account with the seller. This is that “earnest money” check we mentioned earlier in the article. This also serves another purpose: it obligates the seller to remove the listing from the market while the transaction gets finalized. This means that no one else can swoop in and make a better offer while you’re in negotiations with the seller. This earnest money will be applied towards your down payment on the house, so it doesn’t really count as an additional fee, but you should be aware that it is possible to forfeit that money if you cannot come to a final agreement with the seller. 

How long does the escrow process last?

Your average escrow is a period of 30 days. This is usually enough time for the title company to run the title report in search of any liens, easements, lawsuits, etc. Otherwise, how quickly the escrow process moves is all dependent on the buyer. First to be considered is the loan contingency, which automatically adds 17 days for the loan to go through the underwriting and approval process. 

The next factor is appraisal. If the professional appraiser ordered by the bank finds that there is a difference between the appraisal amount and the purchase price, the buyer must either back out of the sale or be required to pay the difference in cash. 

Finally, a buyer might need an extension to complete, review, and sign off on any inspection findings. This may extend the escrow period in order for the buyer to gather additional information on the property. 

So in conclusion, an escrow period can last anywhere from a week (which is fairly quick) to a month, and potentially beyond depending on how much time the buyer can reasonably extend it. As a seller, odds are you want the shortest possible escrow period, so make sure that you are quick and efficient at providing any and all information that the buyer will need in order to finalize the deal. 

Closing Thoughts

Hopefully you’ve learned a lot from our crash course in escrow accounts and real estate escrow. The more you knowledge you possess about the process of home buying and selling, the easier it will be for you to negotiate in the future. 

Steven Kaplan
Steven Kaplan
07:40 18 Aug 21
jerry gallegos
jerry gallegos
16:18 09 Aug 21
Very nice and helpful, responded to any questions very quick. I will do business with them again when I buy my next house.
Christopher Kampshoff
Christopher Kampshoff
00:30 07 Aug 21
Thank you so much guys, my brother was in a tight spot I appreciate you coming through. He's in a much better situation now. Again thank you.
Kelly Brown
Kelly Brown
18:48 27 Jul 21
I attempted to work with Allen, from this company. He seemed very nice and I was curious about what their company would give me for my home, if there were no realtors commissions involved. He said he needed to see the house. He came over and took a bunch of pictures and said he would talk to his partner Ryan, (the numbers guy), and get back with me in a half an hour. I didn’t hear from him that day. The next day I received a text from him, saying he would contact me on Monday. On Monday, he texted to see if I could talk at 12:00? I said, yes, he never called. Tuesday I receive a call from a random realtor telling me that Allen’s company has referred me to him. I call Allen, of course, to ask him what the heck is going on and he says yes, I work with this realtor, but I didn’t give him your information, he pouched it from our website!! I then say, so are you going to work with me and I find out, exactly what I already knew, they couldn’t offer enough money for my house, so they are not going to make an offer, HUGE SURPRISE!! #1, if you want your personal information safe, do not work with this company and #2, if you want a good offer on your home, don’t work with this company. I bought my home 3 years ago, it’s in great condition, in a great zip code and the market is through the roof!! If you can’t buy a house and get close to what someone needs financially right now, I don’t know when you can! Pick another company besides this one!! There are many!! Stay far away from this particular WE BUY HOUSES FOR CASH!!! You have been warned!!!
Carolyn Gobel
Carolyn Gobel
18:16 22 Jul 21
This company helped keep us from foreclosure. Thank you!
Carlos Caballero
Carlos Caballero
19:15 23 Jun 21
Thank you guys for your help with my Grandmas home. It was in rough shape and she left so much stuff. We couldn’t have taken on cleaning it out and the project.
jesse phalin
jesse phalin
01:29 18 May 21
Thank you, Thank you, Thank you! Went above and beyond assisting me through this process. Helped me move my things and even let me leave what I wasn’t taking with me. Thanks for all of the hard work.
Kelly Stewart
Kelly Stewart
21:27 08 May 21
My husband handled the process but felt good dealing with this local company and they did not try to change price after seeing the house. They actually offered higher once they saw our home. Had 5 companies come our to give us bids and they all were bait and switch. They beat everyone’s offers too. We tried to list before and couldn’t sell. I don’t know why anyone would work with head aches of real estate agents and paying commissions, banks, inspectors and the time to close only to walk away with the same money. Thank you Ryan and Jamie.
degan Stewart
degan Stewart
21:23 08 May 21
Thank you guys so much. Jamie is so sweet and on it. Ryan Is one of the most genuine people I’ve met in Vegas. They did what they said they’d do when they said they would and kept us in the loop the whole time
Brian Higgins
Brian Higgins
22:00 04 May 21
Thank you guys so much for everything. Ryan and Jamie Helped me find a place to get out of our old place. It was so nice to have the moving company just handle everything for me.
Sheila Winn
Sheila Winn
19:05 09 Apr 21
I struggled with the idea of selling my house to a "flipper". This company was fair, professional and extremely helpful every step of the way. I never had to wait for a response from Kelly Schnippel when I had a question or concern.I personally would recommend them to anyone looking to get a fair price for their property all the while getting kindness, professionalism and assistance from the buyer.Thank you Kelly Schnippel! I appreciate YOU and your team!Sheila Winn
Valerie Grijalva
Valerie Grijalva
17:30 27 Feb 21
Casey and his team will handle your transaction with the upmost professionalism and class like no other. Their knowledge in real estate will exceed your expectations and you won't be disappointed from beginning to end with their communication and systems to ensure your goals are met. I highly recommend Casey and his team!
Ann Reback
Ann Reback
18:51 25 Feb 21
Thank you for your professional and personal help in this process. You and your team have been so knowledgeable, responsive, courteous and kind...understanding my goals and executing each step in a timely and professional manner! THANK YOU! I will recommend you and your team to friends and others in our community.
Aviv Ben Shimon
Aviv Ben Shimon
16:38 25 Feb 21
Jess Lapensee
Jess Lapensee
16:31 25 Feb 21
From start to finish the selling process was quick and easy!
Eyal Karban
Eyal Karban
16:22 25 Feb 21
The best team in the business!Really helped us to cash out our home, very fast, very professional, great price, thank you!
jevim kale
jevim kale
04:17 27 Jan 21
Best experience with We Buy Any Vegas House. Extremely knowledgeable about home selling process and marketing. Wonderful people to work with. Highly recommend if you are looking to sell your home in Las Vegas NV.
Kate 7Timmons7
Kate 7Timmons7
01:02 26 Nov 20
We were looking to sell our home and called We Buy Any Vegas House so we could get more information. We spoke to Casey Ryan. Ryan was informative, answered our questions, and he went out of his way to give us the best advice on selling our home. Kelly was also helpful and was quick to answer any questions we had.We recommend calling We Buy Any Vegas House to anyone interested in selling their home.
Towik Jes
Towik Jes
05:36 16 Nov 20
I recently helped my parents sell their home due to unforeseen events and We Buy Any Vegas House.com made the process smooth and easy. Their company offered a very reasonable price for my parents home and they closed in 30 days as promised. Look no where else!
Alexa Pughlet
Alexa Pughlet
04:15 17 Sep 20
We Buy Any Vegas House is a very good company to work with, they were very professional and knowledgeable about their business. They made it very easy to work with them. If i ever had to sell my house again I would definitely call them first. Thank you guys for helping me out in my time need.
Pauletta Smith
Pauletta Smith
21:08 02 Sep 20
I contacted them on 8/06/2020 and had my check in my hand on 9/01/2020! They were fast, professional, and gave me a very fair offer for my property. I had to get out of my house pretty quick because of a medical problem and I was able to do most of the paperwork on line. The title company they worked with was great. Very fast and very thorough. No snags. Easy transaction! Signed all the papers and had my money 5 days later. I would recommend them to anybody. Plus...packed and took what I needed and left the rest. No cleaning or trying to find someone to take what I didnt want. Awesome! Thank you.
James Aimery
James Aimery
05:11 08 Aug 20
We Buy Any Vegas House was a great business team. Staff were helpful, friendly and responsive. I was able to sell my house within 2 months in an area where real estate agents are struggling with many properties on the market for much longer periods. I would recommend them to anyone thinking of selling.
Wayne Romerobel
Wayne Romerobel
03:57 30 Jun 20
These guys are the best place to sell your house in Las Vegas. They gave me a fair price and closed quick for maximum convenience. These people are professional, efficient, and extremely friendly.
Lynne M
Lynne M
04:52 24 Jun 20
I have nothing but positive things to say about this company! I needed to sell a house quickly after a death in my family. I spoke with several Cash for Houses Companies in Las Vegas and settled on We Buy Any Vegas House. Everyone was very sensitive about my situation, helpful, answered all my questions and extremely responsive when I called. Ryan and Kelly were awesome!After we settled on a price everything went super smoothly in escrow and again if I had any concerns or questions there was immediate feedback. Also the fact that I was able to do this remotely as I live in California was extremely helpful! I am so grateful for all the help I received during a very challenging time in my life.
Frank Lyod
Frank Lyod
04:21 12 Jun 20
Great team! Glad we chose We Buy Any Vegas House team who understood the market of real estate in our city. They gave us a fair cash offer for our home. We accepted and closed very quickly. We are happy with the outcome and the way we were treated from start to finish.
Sharla Olivaresretento
Sharla Olivaresretento
04:20 28 May 20
Had a really great experience working with We Buy Any Vegas House.com! I really needed to sell my house in Las Vegas and they helped out. Thank you so much!!
Tom Cruz
Tom Cruz
04:11 12 May 20
If/when I do decide to list my home, We Buy Any Vegas House will be the first place I call. They are professional, helpful, and friendly. They provided a lot of helpful information during the course of our business.
Robinson Hunk
Robinson Hunk
04:31 25 Apr 20
We Buy Any Vegas House buyers is a great blessing to my family. Our house was actually sold very fast, in just 7 days processed. Thank you so much!
Florinda Shuff
Florinda Shuff
04:42 08 Apr 20
Las Vegas home buyers has been great to work with. They’re very knowledgeable in real estate and always do what they say. I highly recommend We Buy Any Vegas House.
Florinda Shuff
Florinda Shuff
04:53 21 Jan 20
I got an amazing job offer down in Las Vegas and needed to sell my house fast. First, they explained everything to me and how it all works (selling your house for cash). The process was pretty easy and quick which I appreciated greatly!!
Freddy Aleman
Freddy Aleman
18:47 27 Dec 19
My wife and I recently bought a home from Casey Ryan. The home we purchased is located in Centennial Hills. Gorgeous remodel. Casey and his team did a great job of designing the home. We ran into a couple of issues shortly after moving in. Casey had his people out quickly during Christmas week to make a couple of repairs. He gave my wife and I peace of mind during a chaotic holiday week and for that we will always appreciate him. I would recommend a Casey Ryan home to my friends and relatives.
Angela Rienstra
Angela Rienstra
21:06 26 Dec 19
I needed to sell my house from out of state ASAP. I looked into some other larger name companies and was disappointed with their turn-around time and lack of customer service. I'm so grateful to have found Ryan (and Kelly)! They understood my time crunch and moved heaven and earth to buy my house at a fair price and closed by the promised date. They were with me every step of the way and offered world class service! 100% would recommend to anyone!
Sue Kuckelmann
Sue Kuckelmann
17:02 16 Nov 19
We couldn’t be more pleased with the service provided. From start to finish the team was professional and extremely helpful. All the deadlines were met or exceeded even when I was in Arizona and my husband was in Las Vegas. I would recommend them to anyone who is looking to sell in Las Vegas.
Sam Thompson
Sam Thompson
17:47 25 Oct 19
Great people and very professional. Treated me and my situation fairly and with care.
Mandy Majano
Mandy Majano
01:49 07 Oct 19
They did exactly what they said they would. Great company! Highly suggest!
Anthony Montonini
Anthony Montonini
01:31 07 Oct 19
Thank you guys. We were selling our house to Casey And Ryan and there was some HOA liens that totaled over $40k and they met with the HOA board with me and got them reduced to less than $5k so I walked away with $35k more than I thought I was going to. True professionals!
Nicole Dur
Nicole Dur
01:20 07 Oct 19
My grandma needed help selling after my grandpa passed :( anyways I found them through google and they really treated her like their own family. And let us leave a lot of the stuff she had accumulated over 40 years in the house. Thank you Casey and Ryan!!
pat rolman
pat rolman
01:13 07 Oct 19
These guys have true character. We signed agreement to buy my house then my situation changed and they didn’t force me to move forward. Then 2 months later I needed to sell it and they helped me find a new place any everything. They are really Great people.
That_one_random_ Crafter
That_one_random_ Crafter
00:06 24 May 19
This was so easy Casey was very helpful and kept in contact through the entire process thank you again for everything. Highly recommend this company.
Lela Leedham
Lela Leedham
03:08 22 Feb 19
Great experience working with Casey and Ryan. We would recommend them anytime. They are very knowledgeable and very professional.
Emily Binder
Emily Binder
21:16 18 Feb 19
Jennifer Gibbs
Jennifer Gibbs
19:58 18 Feb 19
A very impressive operation. Very professional and knowledgeable. They follow up when they say they will. Very helpful Team. If you're looking for a fast and fair cash offer on your home, these are the guys to call!
Mario Elizondo
Mario Elizondo
19:58 18 Feb 19
Very professional and a pleasure to work with.
Danny O'Bannon
Danny O'Bannon
19:53 18 Feb 19
I called 5 different companies from google trying to find a company that would pay the most for my rental and their offer was higher than the others. Extremely streamlined process. Easiest transaction I’ve done
Ross Greene
Ross Greene
18:04 17 Feb 19
Ryan & Casey were great to work with! Absolute pro's in the business. I would definitely recommend them. If only I could give them more than 5 stars. Hope to work with them again soon! Thanks guys!
Pam Dickerson
Pam Dickerson
23:53 15 Feb 19
Excellent customer service! Helped us through the entire process. Highly recommend!
steve Balsacker
steve Balsacker
19:35 14 Feb 19
Me and my wife had gone through a divorce and we wanted a quick way to get rid of our property so we could just move on with our lives, Thankfully Ryan came in and helped us out, I didn't have the time to deal with the headache of people coming in and out as well as all the repairs that were needed. He gave me top dollar for my home and I was out in 7 days!
jason almeida
jason almeida
16:52 14 Feb 19
We have seen their signs around town and thought it was a scam, we decided to give them a call and I couldn't have been happier with our experience. They were professional and knowledgable, they paid for all closing costs and even helped with our family move. Great guys and great company! Thanks again!
Peter Floratos
Peter Floratos
04:51 14 Feb 19
This team handles their business right. They are a pleasure to work with.
Tyler Hubbs
Tyler Hubbs
04:38 14 Feb 19
Ryan and Casey treated me with patience and respect during the whole transaction! Very trustworthy and explained each and every question I had!! I would highly recommend We Buy Any Vegas House!!
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