What is Escrow?

What is Escrow?
Let’s talk about escrow and what the escrow process is when buying or selling a home - in 7 simple steps.
Most people have usually heard of the term escrow before, but unless you’ve purchased or sold a home, don't fully understand the process.
I started on the escrow side of the industry in real estate so I have a very unique perspective from the inside. I’ve worked with some of the best escrow officers in the business. One thing to note here before we dive in, this is specific to Southern California. Many other areas and states do not have escrow as it’s own entity and is often combined with title.
So, what exactly is escrow? In real estate, escrow refers to a neutral third party that holds onto money and documents, until certain conditions are met. It acts as a safeguard for both the buyer and seller during a transaction. The timeframe of escrow will vary based upon what has been agreed upon in the contract, but is typically a 30 day process.
Let's break it down in 7 simple steps…
1. Initial Agreement: It all begins when the buyer and seller agree to the terms of the sale. This includes the purchase price, closing date, terms and any contingencies.
2. Opening Escrow: Once the offer is accepted, the buyer will typically wire an earnest money deposit into an escrow account to show their commitment to the deal. This is usually 1-3% of the purchase price. One quick tip here: Always call escrow before wiring any money to prevent wire fraud.
3. Inspections and Appraisals: During the investigation period, the buyer conducts inspections of the home and the lender orders an appraisal to ensure the property's condition and value meet expectations. If there is solar on a home (which is very common here in California), this is also when the solar transfer will need to be initiated.
4. Loan Approval: If the buyer is financing the purchase, they work with their lender to finalize their approval. Oftentimes the lender’s underwriting team may need additional documentation, which this is important to promptly provide to not slow the process down. The lender then reviews and approves the loan. Once all inspections are completed and agreed upon, and the loan has been approved - contingencies are removed which means the buyer is now committed to closing.
5. Closing Documents: Prior to closing, both parties review and sign all necessary final documents, including the deed, loan docs, and any additional disclosures. Homebuyers will sign their final documents with a notary in-person, either at the escrow office or an agreed upon meeting location such as the buyers current residence.
6. Funds Transfer: Once everything is in order, every T has been crossed, I has been dotted, the buyer transfers the remaining closing funds for the home purchase to the escrow account.
7. Closing: Finally, the escrow officer distributes the funds accordingly, title records the deed, and escrow officially closes! This is when it’s time to celebrate either the successful purchase or sale of your home!! Cue the champagne!
If you have any questions about the escrow process, or ready to get started on your own real estate journey - reach out today. I would be happy to be a resource to you.
Make sure to subscribe for more videos like this!
MARISSA TUER | REALTOR®
Native Real Estate
DRE# 02176947
[e-mail]
✨ The Luxury You Deserve ✨
Follow along on Instagram: marissa_tuer
Visit us at native.us!