California’s escrow process
When you buy or sell real estate you’ll hear the word “escrow” mentioned frequently. And, since it can describe several things, it can be confusing to the layperson. Yes, “stuff” is put into escrow and yes, escrow is also used to describe a process.
Let’s see if we can clear up some of the confusion.
Just exactly what is escrow?
Across California, escrow companies act as impartial third parties to the transaction, ensuring that the contract terms have been met before transferring the large sums of money and documents involved.
So, in a sense, escrow describes a repository – money and documents are held in it. You will hear your real estate agent tell you, for instance, that your earnest money deposit will be held “in escrow.”
Escrow is used to describe a process as well. When all parties have accepted the purchase agreement, it (and all supporting documents) is sent to the escrow company where an escrow officer will “open escrow,” meaning that he or she will begin the closing process.
How it works
When the buyer and the seller come to an agreement over price and terms and both sign the purchase agreement and any amendments and addenda, the documents are then delivered to the escrow company. Either the buyer’s real estate agent or the seller’s will undertake this task (in California, this job typically falls to the listing, or seller’s agent).
All of the documents are put into a file and handed off to an escrow officer who then assign it an escrow number. From here on, everything the officer does will get you closer to closing the transaction. This is why it is so important to be responsive – quickly – to requests for additional documents and information either from your agent or the escrow officer.
Closing the escrow
The time it takes for the transaction to move through acceptance of the contract and opening escrow to the close of escrow varies, and it depends on the desires of the buyer and seller.
In the first section of the purchase agreement, the buyer will indicate his or her desired closing date. It is stated either as an actual date or as in a number of days after the acceptance of the purchase agreement.
Many first-time homebuyers confuse this section with the date they will take possession of the home. That date is indicated toward the end of the purchase agreement and the buyer can ask to take possession either on the day escrow closes or within a specified number of days after the close.
The actual closing
When all of the contractual obligations have been met and the transaction is ready to close you’ll be asked to pay a visit to the escrow company to sign paperwork. Be forewarned: It’s a lot of paperwork.
However, once you’ve signed all the documents, all that is left of the process is for the escrow officer to send the deed (signed and notarized) to the county recorder. Once the deed is recorded, the escrow officer will call the buyer’s real estate agent and utter the three words you’ve waited so long to hear: “We’re on record.”
Congratulations – you’re a homeowner!