What Does Escrow Do in Washington State? A Comprehensive Guide

If you're buying or selling a home in Washington State, you may hear a lot about "escrow." But what exactly does escrow do, and why is it a critical part of the real estate process? As your trusted real estate professional, I want to demystify escrow by walking you through what happens step-by-step. This guide will not only help you understand the escrow process in Washington but also ensure you know what to expect every step of the way.

What Is Escrow?

Escrow is a neutral third party that manages the transfer of funds, documents, and other critical elements to ensure the smooth and legal completion of a real estate transaction. In Washington State, escrow is particularly important because it ensures both buyers and sellers meet all contractual obligations before the property officially changes hands.

Here’s a look at what escrow does on a day-to-day basis:

Step 1: Opening Escrow

Once the Purchase and Sale Agreement (PSA) is received, escrow officially opens. At this stage, escrow will:

• Update the Title: Ensure the title reflects the most recent information about the property.

• Review the PSA: Examine the agreement for any missing initials, signatures, addendums, or clarifications needed to move forward.

Step 2: Reviewing Title

Escrow carefully reviews the title to identify any recorded issues, such as liens, encumbrances, or other matters that must be resolved. This step ensures the property can be delivered with free and clear title to the buyer.

Step 3: Managing Buyer and Seller Packets

Escrow requests and reviews initial packets from both the buyer and seller. This includes ensuring all required forms are completed and requesting any missing information.

Step 4: Ordering Payoffs and Other Clearances

Once the initial documents are in order, escrow coordinates the following:

• Ordering commission disbursements for agents.

• Requesting mortgage payoffs.

• Verifying and settling utility accounts.

• Managing HOA dues and assessments, if applicable.

Step 5: Working with the Lender

If the buyer is using a lender, escrow prepares initial items such as:

• Closing Protection Letters (CPLs).

• Fee sheets.

• Title supplements.

Step 6: Two Weeks Before Closing

Approximately two weeks before closing, escrow reviews the entire file to ensure everything is on track. At this point, escrow prepares:

• Final statements and closing documents for the seller.

• Final documents for the buyer (if it’s a cash purchase).

• Appointments for document signings.

Step 7: Finalizing with the Lender

When loan documents arrive (typically a week before closing), escrow:

• Assists the lender in preparing the Closing Disclosure (CD).

• Reviews the loan documents for accuracy.

• Coordinates the buyer's signing appointment.

Step 8: Closing Day

On the big day, escrow ensures all loose ends are tied up, including:

• Clearing any final lender conditions.

• Confirming the arrival of all funds.

• Releasing the transaction for recording.

Step 9: Recording and Disbursing Funds

Once the transaction is recorded with the county, escrow conducts one final review before disbursing funds. After disbursement, escrow notifies all parties that the transaction is complete. Congratulations—it’s time to celebrate!

Why Escrow Matters

Escrow provides critical oversight and ensures that all aspects of a real estate transaction are handled securely and professionally. By managing the details, escrow minimizes risks and ensures both buyers and sellers meet their obligations, paving the way for a seamless transaction.

Whether you're buying your first home or selling your long-time property, understanding what escrow does can help you feel confident throughout the process.

If you have questions about escrow, the homebuying process, or real estate in Washington State, feel free to reach out. I’m here to guide you every step of the way!

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