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The real estate escrow process in New Jersey is something that generates a lot of questions (and sometimes confusion) among home buyers. This is especially true for first-time buyers who have never navigated the process before.
Today, we’ll look at some of the steps that occur during the escrow process in New Jersey, as well as covering some important terminology.
The Escrow Process for New Jersey Home Buyers
In a real estate context, “escrow” refers to the period of time in between the purchase offer and the final closing. During this process, funds are collected and documents are prepared to finalize the sale of the home.
We will talk more about the process in a moment. But first, a quick definition:
Escrow is a broad term that can mean several different things. It can refer to a process, as well as the money and documents collected during that process. An official definition of escrow is “an item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition.” In a real estate transaction, this can refer to money deposited by the buyer as part of the purchase offer, as well as documents relating to the sale of the home.
You can think of the escrow process in New Jersey as an intermediate step during the home buying process. In a typical transaction, a buyer will provide an earnest money deposit to show the seller that they are serious about buying the house. These and other funds can be held in escrow pending the finalization of the real estate transaction.
At this point, the money has not been released to the seller yet. It’s being held in a special account by a neutral third party, until all conditions of the sale have been finalized.
What Else Happens During This Process?
When the home buyer and seller have agreed on the terms of the deal and signed a purchase agreement, they have officially entered the escrow stage of the real estate process.
At this stage, the escrow agent or company that is managing the closing will start to prepare documents needed to close the deal. There are quite a few documents that need to be prepared and finalized. They can include documentation relating to the title of the property, tax records, loan payoff information, homeowners insurance, property surveys (in some cases), and other documents needed to complete the sale.
In New Jersey, the real estate escrow process typically includes a title search as well. A title company or other third party will review the home’s title to ensure that there is clearly identified ownership of the property, and to make sure that there aren’t any liens against the property that could affect the sale.
The escrow agent or closing company will also collect documents provided by the home buyer’s mortgage lender, ensuring that everything is in order for the final closing process.
How Long Does It Take?
In a typical real estate transaction in New Jersey, the escrow process and closing date will be outlined within the purchase agreement or contract. For example, if the buyer and seller agree that they will close in 60 days, then they have outlined a 60-day escrow period (give or take a few days).
There are other things that take place during the escrow process as well. If a mortgage loan is being used, the lender will order a home appraisal to determine the current market value of the property. Additionally, many buyers schedule a home inspection during this process.
Inspections and appraisals are two different things. The appraiser is primarily focused on determining the market value of the house, while the inspector will examine the property’s condition.
Disclaimer: The escrow process in New Jersey can vary from one home buyer to the next, due to the many variables that are involved in a real estate transaction. As a result, some of the information above might not apply to your particular situation.