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HOW LONG IS ESCROW???

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Real Estate Agent with Better Homes & Gardens Real Estate Cal-BRE # 01734464

HOW LONG IS ESCROW???

The most important factor in determining how long escrow will be is the type of financing the buyer will use to purchase the home.  Typically an all cash purchase is going to between 7 and 20 days. Conventional financing is typically between 20 and 30 days.  FHA financing usually 30 to 45 days and VA financing is usually 35 to 50 days.  Two other main factors are who your lender/loan officer is and the condition of the property.

Cash buyers: They do not need to go through the loan process, nor do they need the house appraised.  Therefore it's only a matter of getting the house inspected to confirm the condition is acceptable to the buyer, completing all of the required paperwork/disclosures and then putting the funds from their bank account in to escrow.  The fastest escrow I ever had with a cash buyer was 5 days, but it's usually 7 - 20 days.

Conventional financing buyer: Conventional financing is considered the "smoothest/easiest" type of loan for buying a house (since cash is not a loan).  The minimum condition requirements of the property is not as strict as FHA or VA.  The appraisals are usually done pretty fast and a good lender should be able to fund within 20 days and 30 at the most. Sellers look at conventional buyers as the second most attractive after cash.

FHA financing buyer: FHA is a little bit trickier and longer for the lender.  The house must be in pretty good condition to pass the visual inspection/appraisal with the lender, otherwise they may require certain fixes to be made before they are willing to fund on the loan (no leaning fences, no broken windows, stove or dishwasher cannot be missing, roof needs to look decent, cannot have lots of visible dryrot, etc).  This can present a problem when purchasing a bank owned property or a short sale since those are basically "as-is" sales. If a certain issue with the property is not acceptable to the lender then it either needs to corrected or the deal cannot go through.  With "as-is" sales, that puts the buyer in a bit of a tough position.  A good lender should be able to fund within 25 days and no more than 35 but some of the slower banks/lenders/loan officers need 45 days to be able to close escrow.  I have some great loan officer contacts that I refer my buyers to that can close FHA deals in 25 days.  They are on top of it and professional.  That is the type of loan officer a buyer should be working with.

VA financing buyer: VA is the longest and most tedious type of loan for a buyer.  Strict condition guidelines have to be met for the property.  A clear pest report must be provided to the lender and sometimes the appraiser will ask for additional items such as a roof certification or other items to be checked out and approved by plumbers or electricians.  VA is the least attractive type of buyer for a seller.  Lenders typically take between 35 to 50 days for VA loans but the loan officers I recommend typically can have them done in 30 - 35 days.  VA deals can be tricky when buying a bank owned house or a short sale unless the home is in excellent condition.  If not, the buyer may have to be willing to invest a bit of money into the property before they are the owners.  Sometimes, a risky task.

Those are the general guidelines for how long it takes to close escrow.  During Escrow, the first half is filled with lots of real estate related documents that need to be reviewed and signed and then the home inspection and appraisal.  After all of that is done, the second half of escrow is mostly the lender getting the buyers file approved and passed through all the underwriting guidelines.  In this market, 9 times out of 10 when you have a delay in close of escrow it is due to the lender not preforming in a timely manner.  That's why it's crucial for a buyer to select an extremely qualified loan officer that will be able to follow through and preform on the timelines of the transaction.  With a bank owned property, needing extra time could cost the buyer a $100 fee per extra day.  In a short sale, going beyond the approved time could end up killing the deal if the sellers lender is not willing to extend the time period.  Those are two things you do not want to be faced with during a home purchase.  Bottom line: Make sure you are working with an extremely qualified lender that gets results fast.

clear skies,

Doug Reynolds

www.BuyWithDoug.com

Comments (1)

Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

I read somewhere that only 20% of escrows are closed as scheduled. It is a good idea for principals not to lock the day of moving in/moving out.

Jul 01, 2015 08:24 AM