Escrow Steps In California

If you're purchasing a property in California, you'll likely encounter the escrow process. Escrow is an impartial intermediary that facilitates a real estate transaction. In California, the escrow process is composed of several steps, and understanding each step can help you prepare and complete the process smoothly. Here are the essential steps of escrow in California:

Step 1: Opening Escrow After you've signed a purchase agreement with the seller, you'll need to open escrow with a licensed escrow company. The escrow officer will gather all the necessary documents and funds and hold them until the transaction is completed. The buyer and seller can both choose their own escrow company, but most often, the buyer's lender or real estate agent will recommend one.

Step 2: Deposit of Earnest Money When you open escrow, you'll typically be required to deposit "earnest money," which shows your commitment to the transaction. Earnest money is typically a percentage of the purchase price and will be held in an escrow account. If the transaction is successful, the earnest money will be applied to the purchase price.

Step 3: Title Search The escrow company will order a title search to ensure that the title is clear and can be transferred to the buyer without any issues. This search involves checking for liens, judgments, or other encumbrances on the property. If there are any issues, the escrow company will work with the seller to resolve them before the transaction can proceed.

Step 4: Inspection and Contingencies Once the title search is complete, the buyer will typically have a period to conduct inspections and resolve any contingencies outlined in the purchase agreement. The escrow company will hold the earnest money until all contingencies are resolved, and the buyer approves the property.

Step 5: Loan Approval If the buyer is using a loan to purchase the property, the lender will require an appraisal of the property to ensure it meets the loan requirements. The escrow company will work with the lender to ensure that all loan documents are completed and the funds are available to close the transaction.

Step 6: Closing Escrow Once all the steps are completed, the escrow company will prepare the final settlement statement, which outlines the funds that the buyer and seller need to pay at closing. The buyer and seller will need to sign the settlement statement, and the escrow company will ensure that all funds are transferred and the property title is transferred to the buyer.

In conclusion, understanding the steps of escrow in California is essential for anyone purchasing a property. The escrow process is designed to ensure a smooth and secure transaction, and working with a licensed and experienced escrow company can make the process much easier. Be sure to communicate with your real estate agent or lender for any questions or concerns regarding the escrow process.