What Does Close of Escrow Mean?

The funds collected throughout the process of a real estate transaction are held in an escrow account. When everything’s finalized and cleared to close, the escrow agent or company holding the funds disburses them to the buyer and seller and closes the escrow account — “close of escrow.” The close of escrow may happen on or shortly after closing day, but not always.

What is the close of escrow process?

Close of escrow is just one part of the overall escrow process, which begins when the buyer makes an earnest money deposit. The deposit goes to a neutral third party to hold in an escrow account. This third party may be an escrow or settlement agent (or company), title company or real estate attorney.

There are several more steps in the escrow process after the earnest money deposit. Here’s an overview, and how close of escrow fits in:

1. Earnest money deposit

When a seller accepts a buyer’s offer to purchase their home, the buyer then makes an earnest money deposit to demonstrate “good faith,” or their seriousness about the purchase. This deposit goes into an escrow account.

2. Appraisal

After the earnest money deposit, the buyer’s mortgage lender orders an appraisal to determine the value of home. Typically, the buyer pays the appraisal fee at this time, rather than putting it in escrow. The buyer may also choose to do a home inspection, which they’ll similarly pay for when it happens, rather than through escrow.

3. Underwriting

The buyer’s lender reviews their loan application, finances, title reports, the appraisal and other documentation to determine whether to approve the mortgage and clear the deal to close. In the meantime, the buyer prepares the remaining funds needed for escrow, including the down payment.

4. Closing day and document signing

Once the buyer and seller meet the requirements of their purchase agreement, they’ll sign closing documents to finalize the sale. This paperwork includes the buyer’s closing disclosure and mortgage note, as well as the deed to the property. Both parties bring cash to close, either by wiring the funds to the escrow account or through a cashier’s or certified check.

5. Close of escrow

Once the closing documents are signed, the escrow agent gives the keys to the home to the buyer and disburses the funds between the buyer and seller. The seller receives the buyer’s payment for the home — the earnest money deposit, down payment and mortgage proceeds. If the seller agreed to any credits, these will be handled through close of escrow, as well. Finally, the escrow agent records the transaction with the local records office.

How long does it take to close escrow?

Close of escrow typically takes 30-45 days. This is the amount of time needed to complete the appraisal; undergo a title search; obtain homeowners insurance; address any repairs; and satisfy underwriting.

How to avoid close of escrow delays

Closing on time is one of the most important considerations for home buyers when choosing a mortgage lender, according to a 2024 Zillow survey. Lenders aim to stay on track, too.

Still, things happen. There may be delays in closing and close of escrow due to issues like missing paperwork, unmet contingencies or title issues. To avoid delays, it’s crucial to respond quickly to any requests for additional documents and stay in communication with your loan officer, real estate agent and escrow agent or attorney. 

If you’re looking for a real estate agent, consider working with a Zillow partner agent to find and buy a home.