Quick Answer
Opening escrow means creating the transaction file with the escrow or settlement provider and beginning to follow the contract and closing instructions to prepare for closing.
You will hear real estate agents and lenders say "we have opened escrow" shortly after a contract is accepted. But what does that actually mean? Here is what opening escrow involves and why it matters.
What Information Is Used to Open Escrow?
When escrow is opened, the escrow officer or settlement agent uses several pieces of information to set up the transaction. These typically include:
- The full executed purchase contract, including all addenda and exhibits
- The names and contact information of the buyer, seller, and real estate agents
- The property address and legal description
- The purchase price, earnest money deposit amount, and financing details
- The closing date and any special instructions or contingencies
- The lender's information and loan details, if applicable
- Any HOAs, title requirements, or special conditions noted in the contract
What Happens Next?
Once escrow is opened, the following steps typically occur:
- File setup: A file number is assigned, and the transaction details are entered into the escrow system
- Title order: The escrow officer places an order with the title department or a separate title company to begin the title search
- Initial documents: Preliminary escrow instructions are drafted and may be sent to the parties for review
- Payoff requests: Payoff statements are requested from the seller's existing lender and any other lien holders
- Deposit coordination: The earnest money deposit is requested from the buyer's agent or brokerage
- Timeline planning: Key dates are identified, including the title commitment date, loan contingency dates, and closing date
For more on the difference between the escrow and title roles in this process, see Title Company vs. Escrow Company: What's the Difference?
Does Opening Escrow Mean Everything Is Approved?
No. Opening escrow simply means the administrative setup of the transaction has begun. It does not mean the title work is complete, the loan is approved, or that the transaction will definitely close. It is the starting point of the closing process, not the finish line.
Is Opening Title the Same as Opening Escrow?
Not exactly. Opening title refers specifically to ordering the title search and beginning the title examination process. Opening escrow is broader and includes the financial and document coordination side of the transaction. In many full-service title companies, both happen simultaneously when the file is opened. In markets where title and escrow are handled by separate entities, they may be opened at different times.
Key Takeaway
Opening escrow is the formal start of the closing process. It creates the transaction file and sets the administrative and financial processes in motion. It does not guarantee closing, but it is the necessary first step.
FAQs
How soon after contract acceptance is escrow opened?
Typically within one to two business days after the fully executed contract is received by the title or escrow company. The contract usually specifies a timeframe.
Who pays to open escrow?
Opening escrow itself typically does not have a separate fee. The escrow fee is part of the overall closing costs and is paid at closing. Who pays it depends on the contract and local custom.