May 9, 2022


Buying a house is exciting but also very complicated. Along with trying to remember your spouse’s birthday and which day your work presentation is due, you now also need to remember dates related to your real estate property!

A few of the dates you have to remember are "set in stone," but others are flexible and can be changed. Fulfilling all deal requirements on the agreed-upon timeline is crucial and will allow for a successful transaction of your property. Forgetting a date or even missing deadlines by a few minutes can terminate your entire agreement. 

As a home buyer, you may be wondering specifically about the escrow process and whether your closing date is flexible or fixed. Keep reading to learn more!

What Does It Mean To Close Escrow Early?

Closing escrow early is a process that allows a buyer to close the escrow on their own terms. It is generally used in real estate transactions and is also an option for buyers who are uncertain about whether they will be able to close the deal.

In an escrow agreement, two or more parties mutually decide to close their escrows with each other on an agreed-upon day, usually before the contract has been completed. This allows both parties to avoid any surprises or unforeseen circumstances in the future, which would result in losses. It also protects both parties from fraudulent sellers and unfair contractors.

What Does It Mean To Close Escrow Early

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What Is The Process Of Closing Escrow Early?

The process of closing escrow early can be seen as a risk, but it can also be beneficial for both parties involved. While it depends entirely on the situation, it could allow both parties to get out of the investment sooner than expected.

You can close escrow early if you have a dispute with your counterparty and need to resolve it before the contract expires. The most common way to close an escrow early is to make a payment.

Two Ways To Make Payments To Close Escrow Early

There are two primary ways to make a payment on an escrow:

  • Send the funds directly to your counterparty.
  • Send the funds through an intermediary bank.

Whether you choose to send funds directly or through an intermediary bank, there are advantages and disadvantages to doing both.

Advantages And Disadvantages

Sending funds directly is faster than using an intermediary bank, but it may be more expensive because of fees incurred in sending money overseas. Using an intermediary bank is more secure, but it takes longer than direct payments, which means that you may not be able to close the escrow before it expires.

The most important thing to remember is that you must be certain of your decision and clearly understand what you are doing. You should also make sure that you will not lose the funds if you decide to close the escrow early.

Who Is Involved In The Escrow Process?

There are key individuals that can help you throughout the escrow process if you need to close early. These may include an escrow officer, a real estate agent, a closing agent, and a mortgage lender.

Escrow Officer

An escrow officer is usually involved in an early closing when one party has to close on a deal before they have received all the required documents or information. They will usually hold the money until both parties have signed off on the transaction.

Escrow Officer

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Real Estate Agent

Real estate agents have a lot of experience in the industry that they can share with their clients. They also have access to information about the market and other valuable resources, like lenders and appraisers.

The following are a few ways that real estate agents can help you close escrow early:

  • They may be able to negotiate on your behalf, which helps keep your costs low.
  • They could provide an appraisal on the property, so you know what it is worth before making an offer on it.
  • They may have connections with other professionals, such as lawyers or appraisers, who could help you close the escrow early.

Escrow Closing Agent

The role of an early escrow closing agent is to ensure that everything is in order before a sale is finalized. They are often required to work with the architect, contractor and owner to make sure that they are in agreement on how much money would be paid and when it would be paid.

To make sure that everything goes smoothly, they must stay up to date with changes in legislation, make sure their clients have accurate information about what their options are and stay on top of any other issues that might arise during construction.

Mortgage Lender

A mortgage lender can use an early escrow to close a loan before the full term. The early escrow closes the loan with a cash-out refinance before the full term of the original loan. This helps in saving money by taking out a smaller mortgage and paying it off faster.

The lender will get back their funds as soon as they have closed on the new loan. The borrower will also get an upfront cash-out refinance payment at closing, which is usually 1% to 5% of the total loan amount.

The mortgage lender is typically the first to close on a home purchase. This process allows the lender to get their money back and avoid any potential risk of not getting it back. This process can take up to three months and can be costly for both parties involved.

What Are The Most Important Closing Documents?

Closing documents are important because they provide the necessary information for the escrow company to close the transaction. This includes all deposits, wire transfers, and other relevant information. The following documents are needed for early escrow closing:

  • Loan Application and Agreement
  • Closing Disclosure
  • Escrow Agreement
  • Trustee's Deed of Trust
  • Title Policies

Closing documents are not just for real estate transactions. They can be used for other types of transactions as well. These include:

  • Transactions involving stocks, bonds, or other securities
  • Transactions that require a title search or a credit report
  • Transactions in which a third party is involved
What Are The Most Important Closing Documents

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Signing Documents To Close Escrow Early

An escrow agent is required to sign certain documents to close a real estate transaction. Early escrow closing refers to the process of signing these documents before the escrow agent has collected all of the money for the property. This process is usually done by a lawyer or title company.

What Are The Closing Costs?

The cost to close escrow early can vary depending on many factors, such as the property type and the market conditions. It can vary from 2% to 10% of the total purchase price. In addition, there are fees for filing an application, having a legal review, notarizing documents, and recording the deed.

Is It Expensive To Close Escrow Early?

This is a common question that many borrowers ask themselves before they sign their loan agreement: Will it be expensive and is it worth it? This is because these closing costs are typically an additional fee that lenders charge borrowers so they can close their loans early without paying any interest on the outstanding balance.

Some lenders offer as little as a 0% interest rate for up to six months, but these rates are typically only available with a longer loan term. Research what lenders in your state are offering and talk to your real estate agent for advice.

Is It Expensive To Close Escrow Early

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What Is The Significance Of The Escrow Early Closing Date?

This date for the escrow contract is a significant milestone for the deal. It signifies that both parties are confident that they are going to meet their obligations and complete the transaction. This gives both the buyer and the seller peace of mind that they won't be caught off-guard by unexpected developments or unforeseen circumstances.

Purchase Contract And Early Escrow Closing

The purchase contract is a document that outlines the terms of a transaction between two parties. It is an agreement that has been signed and it can be used to avoid any disputes later on.

The purchase contract usually consists of terms such as price, delivery schedule, payment terms, warranty, and return policy.

Conclusion: Is Closing Sooner Right For You?

Closing escrow early helps both parties reduce the time it takes for the real estate process to be completed and lowers costs. It is typically done with an online platform that connects lenders with borrowers and real estate agents, title companies, appraisers, and other professionals needed to close on a home purchase.

The early escrow closing process is becoming more popular as it provides a cost-effective solution for both parties involved in a transaction. It may be the correct answer for you, depending on your finances but before you make any decision on closing early, make sure you understand the closing and escrow process! Speak to your real estate agent and escrow officer for clarity on any pending questions you may have.

About the Author

As a native Washingtonian, Carlos Reyes’ journey in the real estate industry began more than 15 years ago when he started an online real estate company. Since then, he’s helped more than 700 individuals and families as a real estate broker achieve their real estate goals across Virginia, Maryland and Washington, DC.

Carlos now helps real estate agents grow their business by teaching business fundamentals, execution, and leadership.

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