Escrow & Closing

What Is Escrow?

Opening escrow in a real estate transaction is a pivotal step that signifies the beginning of a formalized process to facilitate the transfer of property ownership. Escrow involves placing funds, documents, and instructions with a neutral third party, typically an escrow agent or company, to ensure a secure and orderly exchange between the buyer and seller. In Kansas, as in many other states, opening escrow is a standard practice to protect the interests of both parties involved in the real estate transaction. It provides a secure holding space for the earnest money deposit, purchase agreement, and other essential documents. The escrow process in Kansas aims to create a transparent and fair environment, allowing both buyers and sellers to fulfill their respective obligations and commitments in a regulated and structured manner. This safeguards the financial interests of all parties and helps prevent potential disputes by ensuring that conditions outlined in the purchase agreement are met before the finalization of the real estate deal.

How does the escrow process work?

The escrow process in Kansas follows a structured series of steps to ensure a secure and efficient real estate transaction. As your REALTOR®, I will manage this process with you. Here's an overview of how the escrow process typically works in Kansas (and Missouri):

1. Mutual Acceptance of Purchase Agreement: The process begins with the mutual acceptance of the purchase agreement by both the buyer and seller. This agreement outlines the terms and conditions of the sale, including the purchase price, closing date, and any contingencies.

2. Opening Escrow: Once the purchase agreement is signed, the parties open an escrow account with a neutral third-party escrow agent or company. The escrow holder acts as a custodian for funds, documents, and instructions related to the transaction.

3. Earnest Money Deposit: The buyer is required to provide an earnest money deposit, which is a show of good faith and commitment to the transaction. This deposit is held in the escrow account until closing.

4. Inspections and Contingencies: The buyer may have a specified period to conduct inspections and satisfy any contingencies outlined in the purchase agreement. This can include home inspections, appraisals, and loan approval.

5. Title Search and Insurance: The escrow holder conducts a title search to ensure that the property has a clear title. Title insurance is typically obtained to protect the buyer and lender from any unforeseen title issues.

6. Closing Documents: Once all conditions are met, the parties proceed to the closing phase. The escrow holder prepares the necessary closing documents, including the settlement statement, deed, and any other required paperwork.

7. Funding the Escrow Account: Prior to closing, the buyer must fund the escrow account with the remaining funds needed to complete the purchase. This includes the down payment, closing costs, and any other agreed-upon expenses.

8. Closing Meeting: The closing meeting is scheduled, during which the buyer and seller sign the final documents. The funds are disbursed accordingly, and the deed is transferred to the buyer.

9. Recording the Deed: After the closing, the escrow holder ensures that the deed is recorded with the appropriate county office, officially transferring ownership of the property to the buyer.

The escrow process in Kansas provides a secure and neutral environment for the parties involved, helping to streamline the transaction while protecting the interests of both buyers and sellers. It ensures that all conditions are met before the finalization of the real estate deal, reducing the risk of disputes and promoting a smooth transfer of property ownership.

How do I open an escrow?

As your REALTOR®, I will open escrow for you. As soon as you accept an offer on your property, the contract is delivered to the title company. The buyer will also open escrow and deposit the earnest money into the escrow account.  Once the earnest money is deposited, all parties will receive a receipt of confirmation for the contract and funds. 

What information will I have to provide?

As the seller, you will need to provide information for any current liens on the property, such as first or second mortgages. This information will be used to obtain your pay-off amount, which will be paid on your behalf by your escrow officer once the transaction closes. You may be asked to complete a statement of identity. Because many people have the same name, the statement of identity is used to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.

How long is the escrow?

The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. On average, it takes 30 to 45 days for the buyer to obtain a home loan. Cash transactions can be handled much faster. 

Who Pays For What?

A major question in every escrow is: "Who pays what?" The answers vary by county ordinances and standard practices.  What is listed below are "customary" practices.  All fees charged are governed by terms of the sales contract and other written escrow instructions. Note: on some FHA, VA or other government-backed loans, the seller will pay some fees that governmental regulations will not allow the buyer to pay.

Sellers Generally Pay:

• Real estate commission
• Escrow fee
• Owner's Title Policy
• Document transfer tax ($1.10 per $1,000 of sales price)
• Notary fees
• Property tax proration (to date of acquisition)
• Special delivery/courier fees, if required
• Document preparation fees
• Document recording charges
• Homeowner’s association statement fee and prorata dues
• Home warranty (according to contract)
• Work/repairs required (according to contract)
• Matters of record against the property or seller (loans, tax liens, judgments, etc.) and fees required to clear them (statement fees, reconveyance/trustee fees and prepayment penalties)
• Bonds and assessments (according to contract)

Buyers Generally Pay:

• Title insurance policy premiums (lender’s and Buyer's)
• Escrow fee
• Notary fee
• Property tax proration (from acquisition date)
• Special delivery/courier fees, if required
• Document preparation fees
• Document recording charges
• Homeowner’s association transfer fee and prorata dues
• Home warranty (according to contract)
• Inspection fees (according to contract, but usually paid by buyer outside of escrow)
• Matters of record against the buyer including tax liens, judgments and fees required to clear them
• Insurance premium for the first year
• Assumption/change of records fees if the buyer is taking over an existing loan
• Lender’s new loan charges
• Interest on new loan from date of funding to 30 days prior to the first payment
• Other prorations (rents, insurance etc.) if applicable