Escrow: What to Expect and How to Prepare

Escrow is the final step before becoming a homeowner, where all the details of the sale are finalized. Here’s what you need to know and do to ensure a smooth process:

What Is Escrow and Why Does It Matter?

• Escrow is a neutral third-party process that protects both you and the seller.
• The escrow company holds funds, documents, and agreements until all conditions of the sale are met.
• It ensures the transaction is handled fairly and according to the contract.

How Do You Get Into Escrow?

Escrow begins when the buyer and seller agree on a contract. Both parties sign the purchase agreement, which outlines the terms of the sale, including price, contingencies, and deadlines.

How Long Does Escrow Take?

• Escrow typically lasts 30-45 days but can be shorter or longer depending on the terms of your contract and any delays in the process.
• Staying on top of your responsibilities can help ensure a smooth and timely closing.

What Are Your Responsibilities During Escrow? 

• Schedule Inspections: Arrange a home inspection to check for any issues with the property.
• Complete Loan Finalization: Work with your lender to finalize your mortgage and submit any additional documents they request.
• Fulfill the Timeline of the Contract: Make sure all deadlines, such as earnest money deposits or contingencies, are met on time.

Timeline of Events During Escrow 

***These timelines are typical and may vary based on the terms outlined in your purchase contract, lender requirements, and other factors specific to your transaction.***

DAY 1: OFFER ACCEPTED

When you’re ready to write an offer on a property, we’ll strategically draft it and carefully review it with you. Once you’ve given us the go-ahead and signed it, we’ll present it to the seller. If the seller accepts and signs, we officially enter escrow.

DAY 1-3: INITIAL DOCUMENTS & EARNEST MONEY DEPOSIT

If you haven’t already, you will need to submit your lender’s pre-approval letter and proof of funds to the seller. You'll also need to make your initial earnest money deposit. A strong initial deposit is 1% of the purchase price.

DAY 5: SELLER DISCLOSURE STATEMENT

The sellers will provide you with a Seller's Real Property Disclosure Statement, or SRPDS. The seller is required by law to complete this document and disclose any information past or present that affects the value of the property.  

DAY 5-7: HOME INSPECTION

We strongly recommend hiring a professional home inspector—a generalist who evaluates the safety and functionality of a home. Inspection costs typically range from $350 to $900, depending on the size of the property, and are paid by the buyer.

DAY 10-15: END OF INSPECTION PERIOD

Based on the findings of the home inspection, you have three options:

• Move forward with closing.
• Cancel the contract and receive a full refund of your earnest money deposit.
• Request a credit or repair from the seller.

You’ll need to make a decision before the inspection period ends. If you choose to request a credit or repair, it’s good practice to allow the sellers 24 to 48 hours to respond. This also gives us time to negotiate effectively on your behalf.

DAY 10-15: ADDITIONAL DEPOSIT

Typically within one or two business days after your inspection period ends, your second deposit is due to escrow. This is typically the same amount as your initial deposit.

DAY 12-14: REVIEW HOA DOCUMENTS

If the property is in a homeowners association (HOA), then the seller will deliver the associated governing documents to the buyer for the buyer's review. If you find something that you are not satisfied with, you can cancel. 

DAY 15-25: APPRAISAL

If you're using a loan to buy the home, the bank will hire an appraiser to check the home's value, and the cost will typically be covered by you. If the appraisal comes in lower than the purchase price, the lender won’t approve your loan unless you bring in extra cash to cover the difference, or the seller agrees to lower the price.

DAY 17: SURVEY

If the property is a single-family home or land, normally the seller will pay for a survey to be completed. The survey will show the property line and any improvements (man-made objects like a wall or fence) close to the property line. 

If your neighbor has an improvement by more than .5 feet over your property line or vice versa, that is called an encroachment. If there is an encroachment, you have the right to cancel, move forward or get an encroachment agreement. 

DAY 20: TERMITE INSPECTION

In the first few days of the escrow period, you, the buyer will select a termite inspector to conduct a termite inspection and produce a report showing any termite infestation that may be present and recommended treatment to remove any live termites. 

If the report recommends any treatment, the sellers are obligated by the contract to pay for and complete it. 

DAY 25: CONDITIONAL LOAN APPROVAL

Once the lender decides if you can pay off the loan and if the property is suitable collateral for the loan they'll issue a CLA, which the buyer will provide to the seller as assurance that the transaction will close.

DAY 30: FINAL LOAN APPROVAL & DOWN PAYMENT

About 5 days or so after CLA, the lender will provide another letter giving final loan approval. Around the same time, the buyers should submit the remainder of their down payment.

DAY 30-32: SIGNING & FINAL WALKTHROUGH

The buyer will do one last walk-through to make sure the property is in the same condition as when the home was inspected. The lender and escrow will prepare a large pile of documents for the buyer to sign.

DAY 30, 45, 60: CLOSING!

Most transactions in Hawaii take about 45 days to complete, but there can be a lot of variation. In Hawai’i, escrow submits the deed -- which transfers the property from seller to buyer -- and other documents to Hawaii's Bureau of Conveyances (BOC).