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How Long Can Money Be Held in Escrow?

January 14, 2024

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A real estate transaction isn't complete without escrow. There's a lot of money at stake when it's time to transfer property rights, so you should have the support of a trained professional before making any decisions concerning your escrow funds.

If any of the parties fails to comply with the terms of the escrow agreement, there's no way to complete the purchase and the money in escrow can't be released. What can you do in these cases?

Let's start at the beginning, with a quick rundown of what escrow means in a real estate transaction.

Escrow refers to goods or assets that are transferred to a third party until the completion of a specific transaction, like a home purchase, the acquisition of private capital, and even goods aside from real estate property. In real estate, this takes the form of financial funds that are put forward at the beginning of the process. This doesn't rule out the use of other valuables as escrow in real estate transactions.

Two People About to Sign a DocumentTo be clear, is usually up to buyers to put money in the escrow account. This is known as "earnest money" and will ultimately be part of the purchase payment. They can also make additional payments throughout the escrow period to mitigate the blow of paying the purchase price in full and mortgage costs.

With that said, the amount that's allocated to taxes and insurance is also considered escrow costs, and in some cases, sellers can agree to cover those expenses.

What's the Purpose of an Escrow Account?

The most obvious goal in escrow is to protect all financial assets that will go into the transaction. Again, we're talking about substantial amounts of money so both parties risk huge losses if someone acts out of hand.

The aim to protect these funds goes hand in hand with a desire to ensure transparency. Through escrow, buyers and sellers are contractually obligated to conduct the required reviews/inspections and make the necessary deposits on time, all according to local real estate laws.

The Escrow Period

A Person Holding a PhoneLike most parts of a real estate transaction, buyers and sellers can negotiate over the closing deadline, but in Florida, the money is expected to remain in escrow for 30 to 60 days. A longer period implies some circumstances are out of the norm, and it's usually the result of multiple discussions to rework the conditions in the escrow agreement.

Technically, a real estate transaction begins after a purchase offer is accepted by the seller. The escrow account is created once buyers, sellers, real estate agents, and lawyers hash out the terms of the contract. Then, the agreed-upon amount is transferred to the account with the expectation that it will remain untouched until all the stages are complete (and until the buyer pays for the price of the property in full, if they plan to pay in cash).

Of course, it's up to each party to meet certain obligations on schedule, and this is where you can be faced with some delays.
The process leading to the release of the funds goes as follows:

  • The property goes through a series of inspections, starting with the initial appraisal to confirm that its value matches its price. The subsequent inspections might result in specific conditions being added to the escrow agreement, like repairs to leaks, cracks, broken pipes, power outlets, etc. This could also involve specific renovations to discard elements that go against local regulations.

  • Early on in the process, the seller presents all relevant documents for review. The property title is the main asset to prove a person's rights over a house or other real estate property. To do this, clients usually enlist the resources of a title and escrow company who, in turn, takes care of reviewing all related public records. This process is also meant to see if there are additional claims attached to the property and address how they could restrict the buyer's ownership rights. If the title search reveals encumbrances or unpaid debt, sellers need to solve the issue at hand before the closing date.

  • Other steps are related to mortgage money and insurance. These policies are meant to protect the best interests of buyers and sellers, which is why many escrow agreements demand that buyers secure financing in advance. Meanwhile, lender's insurance is one of the standard requirements from mortgage holders; both this and the homeowner's insurance can protect future owners from external factors that could make room for conflict, like encumbrances that slipped the system's notice during the title search.

  • Upon closing the escrow, the buyer must make the downpayment, though the amount to pay is determined by the type of mortgage that has been set during the escrow agreement.

You might need to tweak your timeline if:

  • There are faults in the property title. It usually takes time to deal with liens or unpaid taxes, not to mention the resolution of a hidden claim. Even something as simple as adjusting a typo can take a while to get done.

  • You have trouble getting the approval for mortgage financing.

  • The escrow agreement has several conditions. Maybe there are too many documents to review or the property needs multiple repairs.

  • You can't reach a common ground with the seller. Both parties need to agree on all the terms before moving forward and sometimes, it's hard to reach a middle ground. The lawyers and real estate agents on each side can use their knowledge to find a solution that's beneficial for both parties. Even if you're dealing with a complex problem involving the allocation of escrow costs, a title and escrow service can still mediate to keep steady feedback.

As you can probably tell, you need to be patient while navigating a real estate transaction. The process is long enough to challenge your time-management skills, so it helps to have an informed opinion and the best technology at hand.

If you want to buy a house in Florida, get the best support to ensure a smooth sailing at each stage of your escrow process. Key Title & Escrow offers a long list of real estate services so you can get everything done in one place. Our experts also provide timely assistance to help you deal with last-minute changes.

We know that communication and an open mindset are essential to a stress-free process. That's why our specialists work hand in hand with sellers, buyers, and realtors to ensure that everyone is on the same page. Key Title & Escrow is the surest way to protect your funds and reach a successful closing. Just call (305) 235-4571 or toll-free at (800) 547-0006 to get more information. You can also use the contact form on this page and our team will be happy to answer all your questions.
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