What Is Escrow?
Escrow is a secure process in which a neutral third party oversees the transfer of property ownership. In California, this ensures all conditions of a home purchase agreement are met before funds and documents are exchanged. Escrow officers manage deposits, monitor compliance, and ensure a smooth transaction for buyers and sellers.
In Other States: This process might be called “Settlement” and often involves face-to-face meetings with a settlement attorney.
How Does Escrow Work?
Escrow holds funds, documents, and instructions, ensuring every requirement is met before closing. Key elements include:
- Funds: Your deposit, down payment, and lender’s funds.
- Documents: Inspection reports, title insurance, and deeds.
- Responsibilities: Escrow officers coordinate compliance, record deeds, and disburse funds.
The Escrow Process at a Glance
- Open escrow (typically by your real estate agent).
- Deposit purchase funds into a secure escrow account.
- Follow escrow instructions detailing the transaction terms.
- Complete inspections, approvals, and document reviews.
- Finalize the transfer, with funds and titles exchanged securely.
Your Role During Escrow
Stay proactive! Review disclosures, investigate concerns, and ask questions:
- Inspect Transfer Disclosure Statements for any unanswered or vague items.
- Research zoning laws, safety statistics, and local amenities.
- Consider optional protections like home warranties, which cover repairs for a fixed fee.
Buyer Disclosures 101
During escrow, you'll receive crucial information about the property:
- Lead Paint: Required disclosures for homes built before 1978.
- Natural Hazards: Identifies flood zones, fire areas, and seismic hazards.
- Mello-Roos Taxes: Details about community tax districts.
- HOA Rules: Review CC&Rs, financial documents, and pet or age restrictions.
Quick Tips for Buyers
- Escrow Timeline: Most escrows close in 30–45 days.
- Proactive Research: Use resources like Megan’s Law databases for neighborhood safety checks.
- Loan Process: Understand each step from application to closing.
