Escrow Timeline: A Guide for California Home Sellers

Selling a home is a process made up of four basic steps; listing, accepting an offer, escrow and closing. This post is going to explain what escrow is, how it works and what you can expect to experience throughout the process. To start, let’s take a detailed look at where the word escrow comes from and what it means.photodune-1206279-real-estate-realtor-sold-sign-and-house-for-sale-s.jpg

What exactly is escrow?

When you sell a home in California, you use an escrow account to manage the transaction. An escrow account is a financial account held by a third party, generally referred to as an escrow agent. Money put towards the home purchase by the buyer is held in this account until the sale closes. Once the escrow agent has verified that both the buyer and seller have completed all the necessary steps to finalize the sale, the funds are released to the seller. The time period in which all these things are verified is referred to as escrow. 

The basic concept of escrow is quite simple, but the process consists of quite a few steps. Let’s take a look at an overview of the process.

Pre-Escrow:

  • Once an offer to buy the property has been accepted by the seller, a purchase agreement contract is signed and the escrow process begins.

Escrow is funded:

  • Before you go any further, escrow has to be funded. That means a fraction of the down payment  (referred to as earnest money) is deposited into the escrow account by the buyer’s real estate agent. The purpose of earnest money is to have the buyers put some skin in the game, showing they are serious about the purchase.

Disclosures & Inspections:

  • The buyer is given a list of disclosures about the house or property as mandated by state law. You can check out California’s disclosures here. The disclosures provide information on known problems or defects for that area or age of house, such as leaky roof.

    Disclosures benefit the buyer because he or she knows what faults the property has. Disclosures benefit the seller because they believe the known faults were built into the agreed upon price by the buyer, therefore, the seller won’t be as willing to go down in price during negotiations.

  • Inspections initiated by the buyer are the next step. These can include general contractor inspections, pest inspections, roof and chimney inspections, foundation inspections and sewer inspections to see if any or all of these systems have issues that require repair.

Price Negotiations Based on Inspection Findings:

  • The buyer may ask for repair work prior to a purchase, or the buyer may ask for a reduced price with the needed repairs taken into account. The seller has the option of agreeing to the repairs or they may negotiate the price down to compensate for needed repairs. 
  • Once a decision has been made, the buyer signs the inspection results or inspection contingency report.

Buyer Secures Funding:

  • In the next part of the process, nearly all of the work must be done by the buyer. Appraisals must be completed, homeowner’s insurance must be secured and funding must be approved by their lender.

Title Searches & Insurance:

Once all financing and other requirements are complete, it’s time for closing. This part of the process involves both the buyer and the seller, but the buyer does the bulk of the work.

  • First, the buyer runs a title search to make sure the title is considered free and clear. 
  • Next, the buyer must secure title insurance.
  • Finally, the buyer’s lender sends the final loan documents to the escrow agent or attorney for the seller.

Close of Escrow:

  • The buyer finishes paying the down payment, closing costs and other expenses to the escrow agent. Once the deed is recorded, the funds are disbursed, and closing is complete.

Now that you understand the entire escrow process, you can move forward with your home sale with confidence.


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