What Is Escrow: A California Homebuyer's Guide

    For many homebuyers in California, the escrow process can seem confusing or overwhelming, especially for first-time homebuyers. In order to help, we’ve outlined the process to help to provide a better understanding of what escrow like for California homebuyers.

    What IS Escrow In California?

    It’s important that we define escrow because it can mean a few different things. For a general definition, escrow, in the context of real estate, is the intermediate step after the purchase offer has been accepted but before closing. The term can also refer to the company or agent that facilitates this process and holds onto the funds before closing.

    We have previously discussed “earnest money,” which is the check that homebuyers write to show sellers that they are serious about their offer. This earnest money is typically deposited into an escrow account, where a neutral third party (escrow) holds the money until the negotiations are complete.

    How Does Escrow Work In California?

    Once the purchase agreement has been signed, and the earnest money has been transferred to the seller, escrow begins. The escrow agent will then prepare documents for closing. The documents include tax information, property surveys, loan payoffs, homeowners insurance, and other paperwork needed for the sale of the property.

    Generally, a title search is conducted during the escrow process, meaning the escrow company examines several property records. The objective is to identify ownership of the property and ensure there aren’t any claims against the property that could obstruct the sale.

    The escrow agent or closing company will also gather all other necessary paperwork to close the deal, including documents from the mortgage company.

    Once all the paperwork and research has been completed and processed, the homebuyer and seller can close.

    Closing is when the buyer and seller sign the paperwork for the transaction. The old mortgage loan will be paid off (if necessary), and the deed will be signed over by the seller. Closing is also when all parties, real estate agents included, are paid.

    Escrow Process and Timelines in California

    The escrow process varies for each situation. The average escrow timeline is 30 to 60 days in California. In general, the purchase agreement signed by the buyer and seller includes a timeframe for escrow and the closing date.

    The number of days an escrow process will take is noted in the purchase contract and escrow instructions. Sometimes, an escrow closing can be delayed if underwriting has additional conditions that the buyer and lender need to resolve. Escrow can be delayed due to unexpected circumstances like missing documents, signatures, and disputes between the parties involved in a real estate transaction.

    What Should The Homebuyer Be Doing?

    The homebuyer’s role during escrow is to provide all information and documents that are requested quickly. It is not uncommon for buyers and sellers to sign revised documents or provide additional paperwork to close the deal. Efficiently handling these requests can help keep the loan on schedule. You’ll also want to make sure you ask any questions as they arise and not save them for the closing day.

    Escrow Fees in California

    Escrow fees are not fixed in California. Typically, escrow fees vary based on the size of the property and the complexity of the real estate transaction, and overhead expenses for the parties involved. Some escrow holders have a set fee that they use to calculate the total out-of-pocket cost homebuyers will need to pay during their purchase or refinance. There could be additional escrow fees for extra services like drawing grant deeds, printing loan documents, or some lender fees. As a result, escrow fees vary between lenders, escrow companies, and regions of California.

    Still Have Questions?

    There are many nuances in the homebuying and escrow process. Talk through any questions you have with one of JVM’s expert Client Advisors. You can reach our team here, by phone at (855) 855-4491, or by email at [email protected].

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