What to Expect During Escrow in California: A Step-by-Step Guide for Buyers and Sellers
Offer accepted! Congratulations. Now what?
If you are buying a home in California, the next phase is escrow. For a lot of people, escrow feels like a black box. You know something is happening behind the scenes, but nobody is really explaining it in plain language.
Let us fix that. This guide breaks down the California escrow process step by step, so you know exactly what is happening, what to expect, and where things can go sideways if you are not paying attention.
What Is Escrow in California
Escrow is a neutral process where a third party, the escrow company, holds all the documents and funds related to your real estate transaction until every condition of the deal is met.
Think of it as a safety net. The buyer does not hand money directly to the seller, and the seller does not hand over the keys until everything checks out. The escrow officer manages the process and makes sure all the pieces come together.
In California, escrow typically lasts 30 to 45 days, although it can be shorter or longer depending on the transaction.
Step-by-Step: What Happens During Escrow
Step 1: Opening Escrow. Once the purchase agreement is signed by both parties, escrow is officially opened. The escrow company receives the signed contract and the buyer's earnest money deposit. This deposit shows the seller that the buyer is serious. Your agent usually handles this part.
Step 2: Title Search and Preliminary Title Report. The title company conducts a search to make sure the property's title is clear. This means checking for liens, judgments, easements, or other issues that could affect ownership. The buyer receives a preliminary title report to review. This is not a step to skip. There is A LOT of valuable information contained in the title report.
Step 3: Inspections and Due Diligence.The buyer typically has a window, usually around 17 days under the standard California Residential Purchase Agreement, to conduct inspections. This includes a general home inspection, pest inspection, and any other specialized inspections. This is also when the buyer reviews the seller's disclosures.
Step 4: Appraisal. If the buyer is using a mortgage, the lender will order an appraisal to confirm the home's value. If the appraisal comes in low, the buyer and seller may need to renegotiate. Paying cash? You may want to consider getting an appraisal too, especially if the property wasn’t on the market.
Step 5: Loan Approval. The buyer's lender works on finalizing the loan. This includes underwriting, verifying income and assets, and issuing a final loan approval. Delays here are one of the most common reasons escrow takes longer than expected. Stay on top of the requests from your lender (yes they’re going to ask for a ton of information and probably multiple times).
Step 6: Removing Contingencies.As the buyer completes inspections, secures financing, and reviews disclosures, they remove contingencies one by one. Once all contingencies are removed, the buyer is essentially committing to the purchase.
Step 7: Final Walkthrough.Before closing, the buyer does a final walkthrough of the property to make sure everything is in the agreed-upon condition.
Step 8: Signing and Closing. Both parties sign the final documents. The buyer signs loan documents, and the seller signs the grant deed. Once everything is signed, the escrow company records the deed with the county, and the transaction is officially closed.
Where Things Can Go Wrong During Escrow
Escrow is not always smooth. Here are some of the most common issues we see.
Title problems. Liens, boundary disputes, or errors on the title can delay or even kill a deal. This is why reviewing the preliminary title report carefully is so important.
Inspection surprises. Major issues discovered during inspections, like foundation problems, mold, or roof damage, can lead to renegotiations or cancellations.
Appraisal gaps. If the home appraises for less than the purchase price, the buyer may need to come up with additional cash or the deal may need to be restructured.
Financing delays. Lender issues, missing documents, or changes in the buyer's financial situation can slow things down.
Seller disclosure issues. If the seller fails to disclose known defects, it can create legal problems down the line. California has strict disclosure requirements, and ignoring them is risky for everyone involved.
Learn more about California seller disclosures at www.yourhomelegal.com/blog
Why You Should Have an Attorney During Escrow
Your real estate agent is great at a lot of things. But your agent is not a lawyer (at least most agents aren’t lawyers!).. And during escrow, legal issues are present around every single corner.
Title problems, contract disputes, disclosure concerns, and deed preparation all require legal knowledge. It doesn’t even need to be a problem now - but something that could be a problem in the future. Having an attorney review your documents during escrow can save you from costly mistakes.
At Your Home Legal, we help California buyers and sellers navigate the legal side of escrow. We review contracts, title reports, and disclosures. We prepare deeds. And we make sure you understand exactly what you are signing.
Learn about our real estate services at www.yourhomelegal.com/real-estate
Going through escrow in California and want to make sure you are protected? We are here to help. We will review your transaction and make sure nothing slips through the cracks.
