Understanding the escrow process in California can help buyers and sellers know what to expect during this crucial stage of the real estate transaction.
You’ve just gone under contract, and you’re about to hear the word “escrow” a lot. This is the process that helps move the home sale from agreement to closing.
In California, the seller generally opens escrow, although the buyer can also do so. From there, a neutral escrow holder receives funds and documents and follows the parties’ written instructions while the buyer, seller, lender, and other professionals complete their respective parts of the transaction.
If you’re buying or selling real estate in the San Fernando Valley, here’s what the escrow process in California involves — who handles what, and what can affect the path to closing.
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How the escrow process in California works
Escrow is the process in which a third party holds funds, documents agreed terms, and follows the buyer’s and seller’s written instructions until the transaction requirements are satisfied. The escrow holder doesn’t negotiate the deal or advocate for either side.
From there, the process generally unfolds in four phases.
Phase 1: Opening escrow and making the deposit
Once the buyer and seller have agreed to the sale, escrow can be opened, and the escrow holder receives the information needed to begin processing the transaction.
If you’re the buyer, one of the first responsibilities is submitting the deposit required by the purchase agreement. This is also the stage when the escrow holder begins coordinating documents, funds, and instructions with the parties and other professionals involved in the transaction.
Make sure to review requests promptly and pay close attention to the dates in your purchase agreement.
Phase 2: Documents, inspections, and contingencies
Once escrow is underway, multiple parts of the transaction move forward simultaneously. As a buyer, you’ll review disclosures and title information, conduct inspections, and work through contingencies. As a seller, you’ll provide disclosures and respond to inspection-related requests.
During this phase, you may encounter documents related to:
- Seller disclosures
- Title reports
- Natural hazard disclosures
- Inspection reports
- HOA documents, if applicable
- Contingency paperwork
- Property-specific agreements
What happens if, say, the inspection reveals a roof issue? The escrow officer remains neutral and doesn’t decide what either party should agree to. The buyer and seller address that issue through the appropriate channels.
Phase 3: Loan approval and preparing for closing
If you’re financing the purchase, your lender will be working through the loan process alongside escrow. Buyers may need to:
- Provide updated financial information
- Satisfy remaining loan conditions
- Review final loan documents
- Coordinate with escrow to meet requirements
Escrow also prepares the settlement figures using the buyer’s deposit, applicable credits, closing costs, payoff demands, and other authorized amounts. As sellers review their estimated proceeds, buyers should confirm how much they’ll need to bring to closing.
For most covered mortgages, buyers must receive the Closing Disclosure at least three business days before closing, giving them time to review the final loan terms and costs.
Phase 4: Signing, funding, recording, and closing
The final stage brings the documents and funds together. Buyers and sellers sign the required closing documents, and the buyer provides any remaining funds needed to complete the purchase.
From there:
- The lender funds the loan, when applicable
- Escrow sends the required documents for recording
- Once recording and the remaining escrow conditions are complete, funds are disbursed according to the escrow instructions
- Depending on the property, the seller may need to pay off existing mortgage, liens, or other obligations tied to the sale before receiving the rest of the proceeds.
- The buyer takes possession and receives the keys according to the timing set out in the purchase agreement.
💡 What if there was no escrow?
Imagine buying a home without escrow. You wouldn’t want to hand over your purchase funds directly to the seller before all transfer requirements are complete. Likewise, sellers wouldn’t want to transfer ownership without the certainty that funds are available. Escrow provides a safe and impartial middle ground.
Check out the California Department of Real Estate’s quick escrow guide to see what else to prepare for.
Issues that usually delay escrow
Even with a target closing date in place, some issues can take longer to resolve than expected. Buyers and sellers can’t prevent every delay, but knowing where holdups tend to happen will help you stay prepared.
Financing or appraisal issues
A lender may need additional documents, more time for underwriting, or clarification about the buyer’s finances before approving the loan. An appraisal can also slow things down if it’s delayed or if the value creates a financing issue that the parties need to address.
Inspection findings and negotiations
A significant inspection finding can lead to additional evaluations, repair estimates, or negotiations over credits and repairs. The more follow-up an issue requires, the more likely it is to affect the original timeline.
Title and payoff issues
Liens, ownership questions, or incomplete payoff information may need to be resolved before the transaction can close. Sellers may also need to provide additional information so escrow can obtain accurate payoff figures for mortgages or other obligations tied to the property.
Missing documents or closing funds
Late signatures, incomplete paperwork, or delayed funds can hold up the final steps. Buyers and sellers should review requests promptly and keep an eye on deadlines as closing approaches.
If the scheduled closing date does need to change, escrow doesn’t simply decide to push it back. The buyer and seller generally need to agree to the change and document it appropriately.
FAQs about escrow in California
For buyers, closing escrow marks the point when ownership of the home officially transfers.
How long does escrow take in California?
There is no standard escrow timeline. The length of escrow is largely determined by agreement between the parties, with the target closing date specified in the purchase contract and escrow instructions.
Who chooses the escrow company?
Both buyer and seller need to agree on who should be the escrow holder. That choice must be reflected in the purchase agreement. And since escrow needs to remain neutral, the escrow holder doesn’t represent or advocate for either side.
Who pays escrow fees in California?
Escrow fees are negotiable and can depend on the purchase agreement and local practice. Buyers and sellers should review the contract and closing estimates so they know which costs they’re responsible for.
Is escrow the same as title insurance?
No. Escrow handles funds, documents, and closing instructions, while title insurance protects against certain covered defects or claims affecting ownership. In some California transactions, the same company may provide both services, which helps explain why there’s sometimes confusion around these two concepts.
Gary Keshishyan helps you stay on track from contract to closing
Escrow involves many moving parts, from deposits and financing documents to closing funds. Instead of handling everything yourself, a real estate professional can guide you throughout the transaction — making it easier to understand what comes next and address any issue that arises.
I’ve spent decades helping buyers and sellers in San Fernando Valley real estate get through escrow and make sure they’re guided every step of the way.
Whether you’re buying or selling a home in Granada Hills, Porter Ranch, Northridge, or Los Angeles, I’m here to help make your real estate experience smooth and stress-free.
Call 818.606.6069 or send an email to schedule your free real estate consultation.