When you’re selling or getting ready to sell a home in Ohio for the first time, you might be asking, “How does escrow work when selling a house in Ohio?” Escrow is one of those behind-the-scenes things that makes the whole thing go smoothly.
It’s where money, documents, and responsibilities are all held safely until things are ready to close to complete the sale. While the concept may sound complex, knowing how it works on a basic level can mean you’re better informed when sitting down at the closing table.
In this guide, we’ll break down what escrow is, what it means for sellers, and how the closing process works in the typical real estate transaction. It doesn’t matter if you’re selling a house you’ve owned for decades, or a property that still has a mortgage; knowing how escrow works is a smart move, plain and simple.
Escrow is a recognized financial arrangement where an authorized third party, typically an escrow agent or company, holds funds and documents until all parties of a large financial transaction have been completed by the parties involved.
It’s a secure place to park everything needed for a transaction, protecting the buyer and seller in the process.
On the seller’s side of a home purchase, the process will typically involve an escrow account, earnest money, a purchase agreement, and title insurance. A neutral third party handles this process and follows the instructions laid out in the purchase contract.
There’s a chance you may also have heard about a mortgage escrow account, which lenders require to manage things like property taxes and insurance premiums. This is different than the escrow account used during a home purchase, but the general idea is the same. In both cases, someone unrelated to the transaction holds everything until completed.
During an Ohio real estate transaction, several parties all work together to seal the deal.
The escrow agent is a major player, and they’re the one who handles the money, important closing documents, and official communications between the buyer and seller. They are supposed to adhere to the terms of the agreement without showing either side preferential treatment.
The title company is in charge of researching the property’s history to ensure there are no hidden legal issues, like unpaid property taxes or disputes over ownership. They also issue title insurance, which is a safeguard for the buyer and seller against claims involving the property.
If there’s a mortgage lender involved, they’ll handle any and all loan documents needed during the process. They’ll also verify the buyer’s finances and make sure that all of the needed documents are present for closing, including the down payment, loan funds, and so on.
Once the purchase agreement is signed, escrow is officially opened. The buyer’s agent or the title company will create an escrow file and begin coordinating with all parties involved.
The buyer makes an initial deposit of earnest money, a good-faith deposit. This lump sum is held in the escrow account and is later applied to the buyer’s closing costs or down payment.
The home inspection, appraisal, and any agreed-upon repairs take place. If the contract includes financing or inspection contingencies, they must be cleared before proceeding.
The seller’s lender provides the loan payoff statement. The escrow officer prepares a settlement statement that includes all fees, taxes, and final adjustments.
The seller reviews the closing disclosure to confirm all closing costs, title insurance, and credits. It’s important to check for errors before signing.
Both parties sign the loan documents and deed. Once recorded with the county, the sale is official, and funds are then released to the seller.
The earnest money deposit is one of the first signs that a buyer is really serious about buying your home. This money is generally between 1 and 3% of the purchase price of the home, and it’s put into the escrow account until closing.
If credits or concessions are part of the deal, it helps to understand how a seller credit in Ohio might affect your bottom line.
If everything goes according to plan, the money is applied to the buyer’s closing costs. If the buyer backs out for any reason that isn’t covered in the contract, the seller may be able to keep the deposit, depending on the purchase agreement.
During the escrow period, the account can also hold loan funds, insurance payments, the monthly mortgage payment, and anything else that may be needed to finalize the sale.
Once the buyer deposits their earnest money, they usually have a window of time to inspect the home and confirm financing. This is where things can slow down or shift direction. Inspections and contingencies are a critical part of how smoothly escrow moves.
The most common contingencies are things like a home inspection, appraisal, and loan approval. If the inspection reveals problems, there may be provisions to allow the buyer to request repairs or negotiate a lower price. Here, the seller can agree, offer a credit, or reject the request.
When the buyer can’t meet the terms their lenders require, or if they aren’t satisfied with the condition of the home, they can back out, depending on what the contract allows. This can affect how the escrow payments are handled and whether any earnest money is refunded.
As you get closer to closing, the escrow officer gets all of the final documents together and handles the transfer of the money. The seller signs the deed and reviews the closing statement, which shows where every dollar is going.
This document shows the purchase price, closing costs, and any outstanding balances owed on the mortgage. Also included are adjustments for property taxes, insurance bills, prorated tax and insurance payments, and other miscellaneous costs.
Once everything is in order and has been reviewed and signed, the escrow company will release the funds, record the sale with the county, and process the official transfer of ownership. That’s where you, the seller, get paid.
If your buyer is using a loan, the funds from the mortgage company will be included in the transaction and thus listed on the closing statement. They are combined with the buyer’s down payment and subsequently used for all necessary expenses, like title insurance, private mortgage insurance, and even outstanding bills.
Once this stage is complete, the sale is legally finalized.
Escrow isn’t free. In Ohio, the cost of escrow services is usually split between the buyer and the seller, but this can vary depending on the deal. These fees cover taxes, as well as the services of the escrow officer, document preparation, and other essential expenses for managing all funds securely.
As the seller, your closing costs might include a portion of the escrow fee, title insurance, county transfer fees, and possibly seller credits, depending on what’s in the purchase contract.
Buyers typically cover loan-related charges, including mortgage insurance premiums and insurance payments.
Your mortgage servicer may also require a final adjustment to your escrow account if property taxes or homeowners’ insurance are still due. It’s a good idea to review your monthly mortgage payment history to check for any outstanding balances.
Delays in escrow can be incredibly frustrating, but most of them can be minimized or prevented entirely. One common issue is a delayed loan fund release from the buyer’s lender. If the loan servicer needs more information or if the loan-to-value ratio changes, the process can stall. Missing paperwork or incomplete insurance coverage also holds things up.
From the seller’s side, not responding to repair requests or failing to provide mortgage payoff information on time can drag things out. Unpaid tax bills, incorrect property data, or unresolved liens may also prevent escrow from closing.
The best way to prevent or mitigate these issues is simply to stay in close contact with the escrow officer. Make an effort to get documents in early, and follow up with their real estate agent. That will take care of most speed bumps that pop up along the way.
Sellers going through escrow while selling a house in Cincinnati should keep a checklist to stay ahead of common delays. Knowing who to contact can save time and reduce stress.
If you’re unsure about the status of your closing documents, money transfers, or earnest money, your first call should be to the escrow officer. They’re responsible for managing the timeline and disbursing funds.
Have questions about a loan balance, interest payment, or escrow account annually? Contact your mortgage lender or loan servicer. They can provide a detailed breakdown of your remaining obligations and help you understand the homeowner’s monthly mortgage payment.
If an issue pops up with the contract, or if you have legal questions about the purchase agreement while selling a house in Springfield, your real estate attorney is the person you’re looking for.
Before we started, the concept of escrow probably felt like a fairly complicated aspect of the real estate process. Now that you know how escrow accounts work, it’s easier to manage them as just a step in the larger transaction. Sellers in Ohio should stay informed and be as responsive as possible to help the transaction move through the escrow process without delays.
If you’re looking for a way to sell your house that doesn’t involve dealing with the hassle, a direct sale to a local cash buyer could be just the ticket. H3 Homebuyers offers a zero-effort way for Ohio homeowners to get a fair cash offer and close the deal in just days, letting you move on quickly.
