What To Expect In Escrow

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What Is An Escrow

Escrow is a process where the Buyer and Seller deposit written instructions, documents, and funds with a neutral third-party to ensure that at all contractual obligations are met. The escrow process enables the parties to the escrow to deal with each other without risk, provides an accounting of all the funds deposited in escrow, and provides the Buyer and Seller with a settlement statement. Once the obligations have been met, they transfer funds to the seller and title to the buyer.

Escrow - the road to closing

How Is Escrow Opened

Once a purchase agreement has been signed by all parties, it is customary for the one who selects the escrow holder to make arrangements in opening the escrow by providing all necessary documentation and information to the escrow company. The escrow holder will follow the mutual written instructions of the Buyer and Seller, to ensure that neither party has an unfair advantage over the other. The escrow holder also follows the instructions of the Buyer’s lender, the Seller’s existing lender, and the agents representing either party. The escrow holder ensures the transparency of the transaction, while carefully maintaining the privacy of the consumers.

Your Escrow Officer May:

  • Open escrow and deposit your good faith funds in a separate escrow account
  • Order a title search to determine ownership and status of the house you are buying
  • Issue a preliminary report and begin the process of eliminating the title exceptions you and your lender are not willing to accept
  • Request payoff information for the Seller’s loans, other liens, homeowner’s association fees, etc…
  • Prorate fees, such as property taxes and prepare the settlement statement
  • Set separate appointments allowing the seller and you to sign documents and deposit funds
  • Review documents ensuring all conditions and legal requirements are fulfilled and request funds from lender
  • When funds are deposited, they record documents with the county recorders office to transfer the home-ownership to you
  • After recording is confirmed, they close escrow and disburse funds
  • Escrow will prepare and send final documents to all parties involved

Timeline of Key Events in Escrow Using The California Residential Purchase Agreement

 

Time Buyer Activity Seller Activity
As Soon As Possible
  • Order seller paid reports
  • Order preliminary report (if not done at time of listing)
  • Complete Statement of Information
3 Business Days
  • Buyer gives deposit to escrow
  • If buyer does not, seller can give notice to buyer to perform
  • If applicable, order HOA disclosures and deliver to buyer as soon as possible after receipt
7 Calendar Days
  • give pre-approval or approval letter to seller
  • Verify down payment and closing costs
  • If all cash, verify sufficient funds to close
  • *If SELLER does not deliver disclosures, give Seller notice to perform*
  • If not, Seller can give notice to perform
  • If not, Seller can give notice to perform
  • If not, Seller can give notice to perform
  • If applicable, disclose if condo or planned development
  • *Deliver seller disclosures, reports and inspections to buyer ( ex.TDS, NHD, Preliminary Report, Seller-paid reports)
  • *Seller Delivers complete tax withholding affidavit to buyer, escrow holder, or title company
  • *Seller delivers completed Statement of Information to escrow holder
Time Buyer Activity Seller Activity
7-17 Calendar Days
  • Conduct inspections, review reports and disclosures, request repairs, etc…
  • Make property available for buyer inspections
17 Calendar Days (or 5 days after receipt, whichever occurs last)
  • In writing, remove contingencies or canel
  • Returned signed disclosures
  • If FHA or VA financing, deliver FVA form
  • If Buyer does not, seller can give notice to perform or allow contingency to continue
  • If buyer does not return signed disclosures, seller can give notice to perform
5 Calendar Days BEFORE close of Escrow
  • Verification of property condition
  • If applicable, tenant occupied property to be vacant
  • If applicable, seller repairs to have been completed
Close of Escrow
  • Pay purchase price
  • If loan contingency is still active and loan not funded, give notice of cancellation or negotiate for more time
  • If loan contingency already removed, and loan not funded, breach contract or negotiate for more time
  • If seller cannot perform, give a demand to close escrow
  • If seller cannot perform, negotiate to give more time
  • Deliver Deed
  • If Buyer cannot perform, give a demand to close escrow
  • If buyer cannot perform, negotiate to give buyer more time

Important Time Issues
Notice to SELLER to Perform – No time specified. If Seller does not perform, Buyer has the right to cancel.
Notice to BUYER to Perform – 2 Calendar Days unless otherwise specified in the Purchase Contract.
Demand to Close Escrow – Defaults to 2 Calendar Days

~Days are counted as calendar days unless otherwise specified and a day ends at 11:59pm

 

This Timeline of Events was derived from information provided by The California Association of Realtors legal department

 

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