Escrow Earnest Money Fact or Fiction – 2019 Update

True or false: The average length of time a home spends in escrow has gone down over the last ten years, thanks to technological improvements.

False! Escrow is a very important period of time in the home sale transaction, one that real estate agents don’t expect to see shrinking anytime soon. Yes, electronic signatures are great, but it still takes an average of 30-45 days to get a home from accepted offer to final closing, and that’s a good thing. During the escrow period, buyers can have a home inspection done, and sellers can complete any requested home repairs. The appraisal has to be ordered, performed, and reviewed. The title company can do their work ensuring that the fine details about the property are out in the open (title reports), and the mortgage officer can get the loan ready to go (underwriting).

True or false: Once the seller accepts my earnest money, the home is mine. 

False! As a home buyer, whether in Portland or any other locality, when you make an offer on the home, you are expected to write a check showing that it’s a “good faith” offer. In our area the most common Earnest Money amount we see is 1% of the purchase price. This is the earnest deposit – it goes toward the final purchase price of the home and is part of the down payment. If the seller accepts the offer, the earnest deposit check is typically handed over to the escrow or title company and cashed. The cash then goes into an escrow account, where it stays until the deal is closed and the home changes hands. Meanwhile, you as the buyer can back out if any of the contingencies of the offer are not met (for example, most home sales are usually contingent on inspection) and typically get a full refund of your earnest money deposit (depends on the contract). Can the seller back out? Typically no, not for any reason, unless the contract specifies, which would be not typical.

True or false: A bigger earnest deposit can make up for a lowball offer. 

False! The earnest deposit is not money above and beyond the purchase price of the home — it’s included. That means that if the buyer offers a high 10% earnest deposit, that’s still 10% of the entire offer. The seller is going to get all the money at the same time — remember, it’s all sitting in an escrow account, waiting for the home to close. So a fat earnest deposit does sound nice up front, but savvy home sellers aren’t going to be tricked. 

That said, in some segments of the Portland real estate market, buyers do have the advantage right now (in others they don’t). Low offers are risky, so it’s best to consult with your real estate agent to figure out how much to offer. 

True or false: With escrow companies, services vary.

False! These days the services and fees for title and escrow look very similar across the board. These companies hold the money for the home in a special account and facilitate the transaction (“escrow”) while doing the “title” part. They research the title to the home, ensure there are no liens placed on it, that property boundaries are review-able, and that the seller has the legal right to sell the home. What does vary in my experience is the level of customer service. The title company we use, we believe, provides the highest level of customer service to our clients and that is why we choose them, not because they provide unusual services or rates.

With so many escrow and title companies out there, which do you choose? Again, an experienced real estate agent who knows the Portland real estate market can guide you to the professionals who will meet your needs throughout the transaction, ensuring a timely closing on the home. 

May 17, 2019

Stephen FitzMaurice

Stephen FitzMaurice, Realtor is a top 5% real estate agent in the U.S. A Principal Broker in Oregon, Managing Broker in Washington, he has been licensed since 2003 for residential real estate sales. Call his team in Oregon at 503-714-1111 or in Washington at 360-345-3833.

4% max to sell a home in Portland and SW Washington.
4.25% max to sell a home in Salem and Bend.
Over 2,000 homes sold.