what is close of escrow in real estate

Close of Escrow (COE) In Real Estate: A Clear Explanation

Fewer homeowners have come across the term Close of Escrow (COE) because 2023 was the lowest number of home sales recorded in 28 years! 

Despite a record low there were still over 4 million homes that were bought and sold. Therefore a combined number of 8 million parties may have seen the term Close of Escrow mentioned somewhere in a real estate document. 

So what does it mean?

COE is another one of the many acronyms or real estate jargon. This article will clearly explain what Close of Escrow means when it comes to buying and selling houses. 

Key Takeaways:

  1. The “escrow” is also known as the escrow account. The escrow account is where earnest money, instructions to close on the sale, and important documents such as title and deeds are held for safekeeping.
  2. The escrow account closes when the buyer and seller are 100% happy everything is done including all repairs are made, money released, ownership transferred, etc.
  3. Close of Escrow (COE) is different from the Closing Date.
  4. Escrow can close on the same day as the closing or at a later date but never before.
  5. You can still move in if escrow is not closed.
  6. Escrow will close once the buyer and seller have done everything that was agreed on. 
  7. The person responsible for closing the escrow account is normally the title company and/or an escrow officer.
what is coe in real estate

Table of Contents

What is Close of Escrow (COE) in Real Estate?

COE is yet another acronym in real estate that confuses buyers, sellers, and even real estate agents! Because of this let’s unravel the mystery.

COE is an acronym for Close of Escrow. Close of escrow is the full stop on any real estate transaction. It is the final thing to happen. It is a time of relief and joy for both the buyer and seller. 

So what exactly is being closed? 

Great question!

Escrow is also known as an escrow account. Therefore the Close of Escrow (COE) is when the escrow account is closed. 

Simple enough. Lets use an example.

Let’s say you have a bank account. You want to close it. You ask the bank what you need to do to get it closed. You follow the steps and at the end of them you can close your account.

When referring to buying or selling your house, Close of Escrow (COE) refers to when the escrow account associated with the sale of a property is closed.

Close of Escrow may take place on the same day as the closing date. COE may occur after the closing date. The escrow account will never close before the closing date. 

common escrow accounts in real estate

Common Escrow Accounts In Real Estate

When it comes to buying or selling real estate there are 2 common escrow accounts. The first escrow account is associated with the purchase property. The second is an escrow account a lender sets up to pay property taxes and home insurance.

Today we are talking about the type of escrow account used to buy or sell real estate.

This may lead you to ask:

“What is in an escrow account?”

Let’s take a look.

what is normally in an escrow account

What is Normally In An Escrow Account?

Commonly the types of things in a real estate transaction escrow account includes:

  • Earnest money deposits.
  • The deed or title to the property being sold.
  • Instructions for the escrow officer on how to manage the account:
    • These instructions may include what needs to be repaired before the seller gets the money.
    • The instructions are normally laid out in the purchase agreement.

Once these documents, instructions, and cash are put into the escrow account they are referred to as being held in escrow.

close of escrow versus closing day are they the same

Close of Escrow and Closing Day: Are they the Same?

Buyers and sellers often wonder if the close of escrow and the closing day are the same thing. I’m here to tell you that they are not. COE and the Closing Date are quite different. 

Despite being to separate things COE and closing date are often confused by even the most seasoned real estate professionals and investors. 

This is because, in a large number of cases, the escrow account closes (COE) on the same day as the closing date.

What happens on closing date?

The closing date, or closing day, is the day that both the buyer and seller agree to sign all the documents to transfer ownership of the property. The documents can include:

  1. Loan and mortgage documents.
  2. Disclosures.
  3. Title to the and transfer money for the purchase. The money and the deeds and title are signed and then put into the escrow account.

Once the closing has occurred the buyer is handed the keys, and garage door openers, and is given alarm codes so they can move into their new castle. Moving in is also known as taking possession of the property.

What happens on the day escrow closes: A direct comparison to closing day

COE is a completely separate process from the closing date. The escrow account closes when all conditions of the sale are met. This can include:

  • The buyer asked the seller to make repairs.
  • The seller has deposited cash into the escrow account to buy the property
  • Outstand liens were paid off.
  • Contractors have been paid completely.
  • Any remaining cash has been released such as money owed to the seller for selling their home. 
  • Title documents have been recorded with the county clerk.
  • All of the “To Do’s” to sell the house have been done. 

It is up to the person managing the escrow account to make the final decision to close it. This person is called the escrow officer. They often work for the title company overseeing the sale and that is providing title insurance.

After the escrow officer verifies everything has been completed properly they will close escrow. It is this action, closing the escrow account that COE refers to. 

what happens if coe is not on same day as closing day

What Happens if Escrow Doesn’t Close on the Closing Date?

If buying a house and the close of escrow is delayed, do not fret. And this is why.

It is not uncommon for the closing of escrow to happen on a different day than the closing day. Typically what will happen is the buyer and seller will come up with an agreement/contract. This is often called an addendum.

The addendum is an extension of the original purchase agreement. It adds more conditions so the buyer can still move in on the closing day. The added conditions can occur after the buyer has moved in. 

repairs can delay escrow account closing

Example when close of escrow doesn't occur on the same day as the closing

An example maybe some repairs still need to be completed by the seller. In this instance, the repairs would take place while the new owner is living there. Once the repairs are made properly close of escrow can take place. 

Sell below for more details on common reasons the escrow doesn’t close on the same day as closing day.

can i move in if escrow account not closed

Can I Move in if the Escrow Account is Not Closed?

Yes, you can move into your new home if escrow is not closed. As mentioned above, to move in, a new agreement will be created between the buyer and the seller. Moving in with the escrow still open is not uncommon. As a company that buys houses, we have dealt with it on many occasions.

Let’s take a look at a couple of real-life examples. These are common events, we’ve experienced, that can delay the escrow account from being closed.

Common Delays for the Closing of Escrow

common delays for closing of escrow

Closing down the escrow account can be delayed for a multitude of reasons. Let’s discuss two of the common reasons. Here a re 2 examples that often delay the closing of the escrow account.

Unfinished Repairs

contractor making repairs so escrow can close 1

It is common for the buyer to ask the seller to make repairs to the house. Ideally, these repairs are completed by closing day.

However, fixing stuff often takes longer than expected. Perhaps materials are not available because of the supply chain or because the contractor is not turning up.

Whatever the reason, because the repairs aren’t made, the buyer and seller would enter an agreement for the seller to finish the repairs after the buyer has moved in.

The money needed to make the repairs is held in the escrow account. Also the precise description of what must be fixed before the buyer is happy. 

In this example, the escrow officer would hold money to cover the repairs in the escrow account. This is called an escrow holdback.

As the repairs are completed the escrow officer pays the contractor. After all the construction is completed any remaining cash balance is given back to the seller.

At this point, the escrow agent can shut down the escrow account. This would be the COE.

Does this make sense?

Another example that would delay COE

professional home buyer closing escrow fast

Another common example is an outstanding debt on the house. Perhaps the seller owes the city money for trash service.

Again, the escrow officer would hold back enough cash to pay the outstanding bill. Once the bill has been paid, the remaining balance in the account can be distributed and the closing of the escrow account can occur.

Because COE is separate from closing day the buyer can still move into their new home and be confident any outstanding issues will be addressed.

how long does coe take

How Long Does it Take For Escrow to Close?

It can take 3 to 6 months for escrow to close. This is how long it typically takes from the time you sign a purchase agreement until the title company closes escrow.

The amount of time to close escrow varies a lot depending on several factors including:

  • Organization of the Buyer.
  • Realtors Involved in the Deal.
  • Title Company.
  • Liens or Outstanding Debt on the Property.
  • Organization of the Seller.

 

All these factors can sometimes mean escrow will remain open for more than 6 months. Because of this, it is important to find a home buyer who can close on time when they buy a house, especially if you need to sell your house in a hurry.

the fastest escrow can close is less than one week

What is the Fastest Escrow Can Close?

Wanting to know how fast escrow can close is a great question. This is often a question from a motivated seller. A person who wants to get rid of a property quickly.

The fastest escrow can close is less than 1 week. To close escrow so incredibly fast it is imperative you sell your house to a seasoned house buyer, an expert, a professional. 

A typical buyer who has never bought a home before can create delays because of financing issues or their demands for more repairs.

Contrast this with a process-driven professional home buyer such as Watson Buys. We can close escrow in a matter of days. If you need to sell your house fast this is the fastest way to sell.

how to close escrow account

How to Close the Escrow Account

Closing escrow is straightforward. Simply follow the instructions. Your title company and realtor will work together to guide you through this process. Common conditions to close escrow include:

  • Fixing the necessary items on the inspection list.
  • A Clear Title.
  • Paying Off the Mortgage.
  • Clearing All Liens.

Once all requirements are finished escrow can close. Of course, as someone selling a house, such conditions can seem difficult to remedy. Is there an easier way to ensure escrow closes quickly?

documents needed for close of escrow

What Documents Are Needed for the Close of Escrow to Occur?

Documents typically signed off for the close of escrow to proceed include:

  1. Closing Disclosure.
  2. Deed.
  3. Title.
  4. Bill of Sale.
  5. Settlement Statement.
  6. Loan Documents.
  7. Title Insurance Policy.
  8. Escrow Instructions.
  9. Mortgage Documents.
  10. Home-Owners Insurance.
  11. Real Estate Disclosures.

The list of documents that need to be signed can go on!

Buyers and sellers must carefully review all of the documents signed. All documents must be understood because they are legally binding agreements and involve large sums of money.

If you are unsure about what you are signing it would be prudent to talk to a real estate attorney. Alternatively, you could lean on your real estate agent and title company. Ask them lots of questions to clarify any instructions or terms within contract to buy and sell real estate. Do not sign anything until you clearly understand what you are signing.

Fastest Way to close escrow

Fastest Way To Close Escrow

For a faster and easier solution, if you sell to a cash buyer like, WeBuyHousesInDenver.org, we take care of everything for you. We will work directly with the local municipalities and title company to make sure escrow closes ontime, everytime.