Perhaps you’re reading this because you just accepted an offer on your home. If so, congratulations! Or maybe you’re thinking of selling your home and want to learn more about the process. Either way, you’ve come to the right place. So, how long should everything take? Should I refer to an escrow timeline? What happens next? Every sale varies, but in general, escrow usually takes between 30 to 60 days to close. During contract negotiation, you and the buyer agree to an escrow timeline. This article will provide a general timeline so home sellers know what to expect.
How Escrow Works in California
Before selling your home, you will want to make sure the escrow process is as stress-free as possible. In order to do that, use a licensed and qualified escrow agent. If using Home Bay to sell your home in California, we’ll refer you to our in-house escrow company, CalTech.
California is a unique state where the Title company is typically separate from the escrow company. However, in some areas of Northern California, most notably the Bay Area & San Francisco, it’s more common that the Title company processes the escrow internally. In Attorney states like Illinois and Georgia, it’s common practice for an attorney process the escrow.
In states outside California, the term “escrow” is not commonly used like it is in California. Depending on the state where the transaction occurs, the definition of “escrow” can vary. So, before you buy or sell a home, know what escrow refers to in your state.
Regardless of how you’re selling your home–with a traditional real estate agent, for sale by owner, or Home Bay–there are mandatory closing costs, including Title Insurance fees, Escrow fees, Transfer Taxes, Prorations for Property Taxes, Etc. The purchase contract will dictate who pays the other closing costs (buyer or seller). However, in practice, most areas have a typical protocol for what’s standard. For example, here’s a list by county in California for who typically pays what closing costs.
Now that you have an idea about some of the nuances with the escrow process in California and how it differs from other states, keep reading to learn more about what to expect.
Escrow Process Timeline
Within the first week of escrow, you’ll have many documents to fill out, including disclosures regarding the home, a property questionnaire, and agency disclosures just to name a few.
Day 1: Pre-Escrow
Once an offer to buy the property has been accepted by the seller and a purchase agreement contract has been signed, escrow begins.
Day 2-5: 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 deposits) is deposited into the escrow account by the buyer’s real estate agent. This ensures the buyers put some skin in the game, demonstrating their seriousness about the purchase. Your escrow officer will send you your specific escrow instructions. Typically, the package will include your grant deed to notarize, escrow instructions to sign, commission instructions, tax forms, Statement of Information, and payout documentation. The seller must get these documents back to escrow in a timely manner in order for escrow, title, and the lender to process.
Day 3-20: Disclosures & inspections
The buyers perform their due diligence and investigations on the property. The home must be available for the buyer during this time period. The seller must also keep on all the utilities through the close of escrow. The buyer receives a list of disclosures about the house or property as mandated by state law. Check out a list of California’s home selling disclosures. The disclosures provide information on known problems or defects for that area or age of house, such as a leaky roof or flood insurance. Disclosures benefit the buyers because they know what faults the property has. Disclosures benefit the sellers 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.
Home inspections happen next. 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.
Day 20+: Price negotiations based on inspection findings
Following inspections, the buyer could submit a Request for Repairs, which will either ask the seller to repair an issue or give a credit based on the findings of their inspection. Once a decision has been made, the buyer signs the inspection results, thus removing their inspection contingency. At this point, the buyer cannot pull out of the transaction without losing the deposit, unless the home does not appraise or the buyer cannot get a loan. The seller has the option of agreeing to the repairs or they may negotiate the price down to compensate for needed repairs.
If the buyer’s offer includes an appraisal contingency, an appraiser will come out to the property. As a standard of California law, every home must be properly fitted with smoke detectors, carbon monoxide detectors and the water heater must be double strapped. The appraiser will check for this. During this visit, they will be taking notes on the property, measuring square footage, and lot size to ensure it matches the tax assessor information.
Day 24+: 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 the buyer’s lender. At this point, once financing is secured, the loan contingency will be removed.
Title searches & insurance
Once all financing and other requirements finish, it’s time for closing.
First, the Title Company runs a title search. Most contracts state that the seller must provide a free and clear title to the buyer.
Next, the buyer may secure title insurance. Title insurance is not required for cash transactions, although most buyers want a title insurance policy to protect their interest in the title. If a buyer utilizes financing, the lender will most likely require title insurance. The buyer runs a final title search to make sure the title is considered free and clear.
Finally, the buyer’s lender sends the final loan documents to the escrow agent or attorney for the seller.
Within the final 5 days – Close of Escrow
The buyer will do a final walk-through to make sure the home is in the same condition as when the offer was made. The buyer will also check if all the necessary repairs were made from the Request for Repairs, if any. Assuming all goes well, both buyer and seller will sign one of the final forms known as the Verification of Property. The buyer then 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.
Additional Escrow Resources
- Escrow Checklist for Sellers. With so moving parts, sellers find it helpful to have a thorough checklist that helps guide them through the escrow process. Use this list as a resource to simplify your home sale.
- Escrow Checklist for Buyers. For buyers, the escrow process differs from that of the sellers’. Use this checklist as a resource in navigating escrow as you purchase your next home.
- 10 Steps to Successfully Close Escrow. This post explains how escrow works, what’s involved, and what you can expect throughout each of the stages of escrow.
- Escrow Fees: Defined & Explained. There are a number of fees involved in a real estate sale, including the escrow fee. This post explains what an escrow fee is, what it costs and who pays for it.
In California, escrow plays a critical role in real estate transactions. We hope that by giving you a general escrow timeline, you’ll feel confident in navigating the often complex escrow landscape. This information is intended to assist sellers in completing a smooth and successful real estate transaction.
Please note: This is an overview of typical terms and timelines for California real estate transactions if a loan is involved. These are not definitive as each transaction is negotiated differently.
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