Heard people mention escrow and wondered where your money actually goes between offer and closing? You are not alone. Escrow keeps your funds safe while everyone works through inspections, financing, and paperwork in Wayne. In this guide, you will learn what escrow means in New Jersey, who holds your deposit, the local timeline, and how to protect yourself from delays and wire fraud. Let’s dive in.
What escrow means in New Jersey
Escrow is a neutral holding arrangement for money and key documents while contract conditions are satisfied. Your earnest money deposit and your final closing funds are placed with a trusted third party and released only when the contract terms are met and title is clear. This protects both you and the seller.
Two escrows you will hear about
- Purchase escrow: holds your earnest money and closing funds until settlement. This is the focus of this guide.
- Lender escrow (impound account): after you own the home, your lender may collect part of your property taxes and homeowner’s insurance with your monthly mortgage, then pay those bills when due. It is different from the purchase escrow.
Who holds escrow funds in NJ
New Jersey is attorney-centric. It is common for a real estate attorney to hold your deposit in a trust or escrow account. Sometimes a title company serves as escrow holder. In some cases a broker may hold the deposit in a company escrow account. Your signed contract names the escrow holder, so confirm that detail in writing.
Attorney review and attorney-led closings
Most New Jersey residential contracts include an attorney review period. It is commonly three business days and can be modified by agreement. Closings are typically handled by the attorneys, often at an attorney’s office, with funds disbursed after all conditions are satisfied.
Wayne buyer escrow timeline
Offer accepted and contract signed.
You deliver your earnest money as stated in the contract. Use a certified check or bank wire and send it to the named escrow holder.
Attorney review period begins. Your attorney and the seller’s attorney may approve, negotiate, or cancel during this window.
Inspections and contingencies start. Common items include home, radon, pest, chimney, and sewer or septic checks, plus mortgage, appraisal, and title contingencies. Your deposit remains in escrow while these are open.
Repairs and contingency removals. You and the seller resolve issues or agree on credits. Funds stay in escrow until conditions are cleared or the contract is lawfully ended.
Final loan approval and title clearance. The title search, municipal searches, and any HOA document reviews are completed. Local items can include confirming tax status with Wayne Township and verifying sewer or septic records.
Closing and disbursement. You bring your remaining funds. The escrow holder disburses money per the settlement statement, pays off any existing mortgages, pays closing costs and commissions, and releases net proceeds to the seller.
Recording and wrap-up. The deed and mortgage are recorded with the Passaic County Clerk. You receive your closing statement and copies of recorded documents after confirmation.
How your deposit works
Most buyers in New Jersey put down an earnest money deposit of about 1% to 3% of the purchase price. The amount can be higher in competitive situations and is always set by agreement in your offer.
At closing, the deposit is credited toward your total cash to close. You will see it on your final settlement statement.
If you end the deal under a valid contingency or if the seller fails to meet a contract condition, you may be entitled to a return of your deposit. If a buyer defaults without a contractual basis, the seller may be entitled to keep some or all of the deposit. The outcome depends on the contract and any attorney negotiations.
If there is a dispute about releasing escrow funds, the escrow holder will generally keep the funds until a mutual release or court order directs disbursement. Your attorney will follow the contract’s dispute process.
Who does what in escrow
- Buyer: Deliver your deposit on time, complete inspections, meet mortgage deadlines, and review closing disclosures and the settlement statement.
- Seller: Provide required disclosures, allow inspections, resolve title issues, and supply needed documents to the attorney or title company.
- Real estate agents: Prepare and submit the contract, guide you on timelines, coordinate inspections, and confirm escrow deposit receipt.
- Attorneys: Lead attorney review, oversee title search and clearing, hold or supervise escrow funds, prepare closing documents, attend closing, and handle recording.
- Title company: Perform the title search, issue title commitments and policies, and assist with clearing title issues and closing coordination.
- Lender: Finalize financing, prepare the closing disclosure, and wire loan funds to the closing attorney or escrow agent.
- Escrow holder: Safeguard funds and disburse only as directed by the contract and closing instructions.
Inspections and local searches to expect
Common inspections and checks in North Jersey include:
- General home inspection for structure and systems
- Radon test
- Pest and wood-destroying insect inspection
- Chimney and fireplace inspection, if applicable
- Sewer or septic inspection and verification of municipal connection
- Lead paint disclosure and testing for pre-1978 homes
- Targeted roof, HVAC, or mold evaluations as needed
Attorney and title steps often include the title search, municipal lien and tax searches, review of HOA or condo documents, payoff coordination for existing liens, and preparation of the deed and settlement statement. After closing, the deed and mortgage are recorded with the county, and taxes and assessments are prorated per the contract.
Quick checklist before you sign
- Confirm the escrow holder named in your contract and request contact details.
- Know your deadlines for attorney review, inspections, mortgage, and appraisal.
- Decide which inspections you will order and schedule them early.
- Ask your lender for a realistic closing timeline and cash-to-close estimate.
- Clarify closing costs and prorations for taxes, HOA dues, and utilities.
- Confirm whether an owner’s title insurance policy is included or negotiable.
Protect yourself from wire fraud
- Always verify wiring instructions by calling the escrow attorney or title company using a phone number you obtain from a trusted source, not from an email.
- Never accept last-minute changes to wiring instructions without live verification.
- Keep proof of all payments, including copies of certified checks or bank wire confirmations.
What happens on closing day
You will review and sign final documents, then your lender and you fund the purchase. The escrow holder disburses money per the signed settlement statement. The deed and mortgage are sent for recording with the Passaic County Clerk, and you receive your finalized closing statement after funding and confirmation of recording.
Ready to move forward with clarity and confidence in Wayne? Get local, step-by-step guidance from a trusted neighbor. Connect with Anthony Jordan to map out your escrow plan and next steps.
FAQs
When does escrow start in a Wayne home purchase?
- Escrow usually starts when your earnest money deposit is delivered to the escrow holder named in your accepted contract, subject to attorney review.
Who holds my earnest money in New Jersey?
- It is commonly held by a real estate attorney in a trust account or by a title company. Your contract specifies the escrow holder.
Is purchase escrow the same as a lender escrow account?
- No. Purchase escrow holds your deposit and closing funds. A lender escrow or impound account collects monthly amounts for property taxes and insurance after you own the home.
What if inspections uncover issues or the appraisal is low?
- Within the inspection contingency, you can negotiate repairs or credits or cancel per the contract. A low appraisal affects financing, so you and the seller must address the gap or you proceed with different financing terms.
How can I avoid wire fraud during escrow?
- Verify wiring instructions by phone using a known number, never by replying to email. Do not send funds based on changed instructions without live confirmation.
How soon are funds released after closing in Passaic County?
- Funds are typically disbursed at closing or shortly after recording, depending on lender funding and the closing attorney or title company’s process.
Who pays for title insurance in New Jersey?
- Payment for owner’s and lender’s title insurance follows local custom and the contract. Confirm how it is handled for your Wayne purchase before attorney review ends.