SANTA CRUZ (July 25, 2009) - The escrow period is the time between the moment a property seller and buyer come to an agreement on the terms of sale with a fully executed purchase contract and the moment a new deed is recorded at the county courthouse placing the property in the name of the buyer. Generally, escrow is ‘opened’ when the buyer’s real estate agent gives a copy of the purchase contract and the deposit check (from the homebuyer) to the selected escrow officer at the title company. Escrow is said to be ‘closed’ once the new deed, in the name of the buyer, is officially recorded at the courthouse. By the way, despite popular belief, it is California law that states the buyer is the party that gets to select the escrow officer and title company.

The length of the escrow period can vary from just a few days to several months and is dependent on innumerable factors. During that period the prospective buyer is well advised to have the property inspected by one or more professionals to assure that the property is in an acceptable condition. The title company’s job is to assure the buyer that they will receive clean title to the property. Unless the buyer is paying cash or unless the seller is financing the sale, a lender will provide the funds that the buyer will need when escrow closes. The homebuyer’s lender will review the borrowers’credit and finances along with the purchase contract, appraisal and Preliminary Title Report.

Ideally a purchase contract that specifies a escrow period of at least 30 days is best. However, it is possible, if all the pieces come together in a timely manner, for a lender to complete the entire loan process in 10 business days from the day the borrower sits down with a mortgage professional to start the loan approval process to the day the Grant Deed is recorded at the courthouse. In order for the lender to complete its work in 10 days, the borrower would need to provide all of the requested documentation on day 1 (this would include 07 & 08 federal income tax returns and W-2s, current paystub and 2 months of bank statements). The appraisal would also need to be ordered on day 1 and the title company would have to provide the Preliminary Title Report within 5 days.

Unlike conventional loans, the Home Valuation Code of Conduct (HVCC) does not require mortgage lenders to use an Appraisal Management Company when ordering the appraisal for FHA loans. Consequently, the loan process for an FHA loan could be accomplished even quicker than for conventional loans.

This column is written every Saturday by Peter Boutell, Certified Mortgage Planner and a principal at Santa Cruz Home Finance. You may reach him at (831) 425-1250 of email him at Peter@SantaCruzHomeFinance.com.