The Escrow Process in Texas when transacting Real Estate

This is the actual process after you have executed a contract in Texas.  These next steps are usually what happens while the contract is sitting in escrow at a title company.

1. Opening Escrow: The buyer and seller typically agree to use an escrow agent to facilitate the transaction. The escrow agent is a neutral third party who will hold onto the funds and documentation for the duration of the transaction.
2. Initial Deposit: The buyer will usually make an initial deposit, also known as “earnest money,” which demonstrates their commitment to the transaction. This deposit is typically between 1-2% of the purchase price and is held in the escrow account until closing.
3. Title Search: The escrow agent will perform a title search on the property to ensure that the seller has clear title and can legally transfer ownership to the buyer. If there are any liens or title issues, the escrow agent will work with the seller to resolve them before closing.
4. Home Inspections: The buyer will typically have a certain amount of time, usually around 10 days, to conduct any necessary inspections on the property. If any issues are uncovered during the inspection, the buyer can request repairs or credits from the seller.
5. Appraisal and Financing: If the buyer is obtaining a mortgage, the lender will order an appraisal to ensure that the property’s value is sufficient to support the loan amount. The escrow agent will work with the lender to ensure that all financing and underwriting requirements are met.
6. Closing Disclosure: The escrow agent will prepare a closing disclosure, which is a document that outlines all of the costs associated with the transaction, including the purchase price, closing costs, and any adjustments. This document must be provided to the buyer at least three days before closing.
7. Closing: On the day of closing, the buyer and seller will sign all of the necessary documents to transfer ownership of the property. The buyer will also provide the funds needed to complete the transaction, which may include the remaining balance of the purchase price, closing costs, and any prepaid items.
8. Disbursement: The escrow agent will disburse the funds to pay off any existing mortgages or liens, pay the seller their proceeds, and distribute any remaining funds to other parties, such as real estate agents or service providers.
9. Post-Closing: The escrow agent will provide the buyer and seller with a final settlement statement, which outlines all of the costs and disbursements associated with the transaction. The seller will also transfer ownership of the property to the buyer, typically through a deed or bill of sale.

In summary, the escrow process in Texas is designed to ensure that both the buyer and seller are protected during a real estate transaction. The escrow agent acts as a neutral third party and oversees the process from start to finish, ensuring that all parties meet their obligations and that the transaction is completed successfully.