Once your offer is accepted, you’ll hear one word over and over: escrow. “We’re opening escrow.” “Escrow needs your signature.” “We close escrow on the 15th.” For first-time buyers, people relocating from other states, and even many sellers, it can be hard to tell what escrow actually is and what’s happening behind the scenes.
This guide explains what escrow is in a California home sale, who’s involved, how long it takes, and what to expect at each step.
What Is Escrow in Real Estate?
Escrow is the period between an accepted offer and closing, when a neutral third party holds the money and documents for the sale until every condition in the contract has been met. Once everything is in place, the escrow holder releases the funds to the right people and the sale is recorded. Then the home is officially yours.
The key word is neutral. The escrow officer doesn’t represent the buyer or the seller. Their job is to follow the written instructions both sides agreed to, so no one has to simply trust the other side with hundreds of thousands of dollars.
Escrow vs. an Escrow Account
You may also hear “escrow” used for something different: an account your mortgage lender sets up to collect and pay your property taxes and homeowners insurance after you buy. In California, this is often called an impound account. This guide is about escrow during the purchase, not that account.
Who’s Involved in Escrow?
- Escrow officer: The neutral party who holds funds, prepares escrow instructions, collects documents, coordinates with the lender and title company, and handles the closing. In California, independent escrow companies are licensed by the Department of Financial Protection and Innovation.
- Title company: Searches the property’s title, issues the preliminary title report, provides title insurance, and records the sale. In Southern California, escrow and title are usually handled by separate companies working together.
- Lender: If you’re financing, your lender handles the loan approval, the appraisal, and sends the loan funds to escrow.
- Agents: Your agent tracks deadlines, coordinates inspections, negotiates any issues that come up, and keeps everything moving.
- Buyer and seller: Each side signs documents, meets deadlines, and provides what’s needed to close.
How Long Does Escrow Take in California?
There’s no fixed length. The closing date is set in your purchase agreement. Financed purchases often take about a month, while cash purchases can close faster. Timelines can run longer for things like down payment assistance programs, condos that need HOA documents, or complex transactions. What matters most is that everyone meets their deadlines along the way.
Who Pays Escrow Fees in Los Angeles?
In Los Angeles County, local custom is for the buyer and seller to split escrow fees 50/50. That’s custom, not law, so it can be negotiated in the purchase agreement. Escrow fees are separate from title insurance, transfer taxes, and loan costs, and your escrow officer can give you an estimate early on.
What Happens During Escrow: Step by Step
1. Escrow opens. After the offer is accepted, the accepted contract is sent to the escrow company and escrow is opened. You’ll receive escrow instructions and other paperwork to review and sign.
2. The buyer’s deposit. The buyer deposits their earnest money with escrow, typically within three business days of acceptance under the standard California contract unless the agreement says otherwise.
3. Disclosures and reports. The seller delivers required disclosures, including the Transfer Disclosure Statement and the Natural Hazard Disclosure report. The title company issues the preliminary title report. If it’s a condo, HOA documents come in too.
4. Inspections and investigations. The buyer schedules a home inspection and any other inspections, like termite, sewer, roof, or chimney. If issues come up, the buyer may ask the seller for repairs or a credit.
5. Loan and appraisal. The buyer’s lender orders the appraisal and works toward final loan approval. Buyers should respond quickly to lender requests and avoid big financial changes, like opening new credit or changing jobs, during escrow.
6. Contingency removal. The standard California contract gives the buyer 17 days by default to complete inspections and review, with loan and appraisal contingencies also commonly set at 17 days. The buyer removes contingencies in writing. After that, the buyer’s deposit is generally at risk if they back out without a valid reason.
7. Final numbers. Escrow prepares a closing statement showing every cost and credit. If you’re financing, your lender must also give you a Closing Disclosure at least three business days before closing. Compare it with your loan estimate and ask questions about anything unexpected.
8. Final walkthrough. A few days before closing, the buyer walks through the home to confirm it’s in the agreed condition and any agreed repairs were completed.
9. Signing and funding. Buyers and sellers sign their closing documents, usually with a notary. The buyer sends the remaining funds to escrow, and the lender sends the loan funds.
10. Recording and closing. The deed is recorded with the Los Angeles County Registrar-Recorder. Once it records, escrow closes: the seller is paid, existing loans are paid off, and the buyer gets the keys.
Protect Yourself From Wire Fraud
Escrow is a prime target for wire fraud. Scammers send fake emails that look like they’re from your agent or escrow officer with “updated” wiring instructions. Before you send any money:
- Call your escrow officer at a phone number you’ve verified independently, never one from an email
- Confirm the wiring instructions by phone before sending
- Treat any last-minute change to wiring instructions as a red flag
- Call to confirm your funds arrived
Tips for a Smooth Escrow
For buyers:
- Keep your finances stable until after closing
- Respond quickly to your lender, escrow officer, and agent
- Read every disclosure and report, and ask questions before your contingency deadlines
- Start shopping for homeowners insurance early, especially in fire zones
For sellers:
- Order reports and gather disclosures before you list
- Have your loan information, HOA contact, and any permits ready
- Respond to repair requests and signing appointments promptly
- Plan your move so the home is ready for the final walkthrough
Related reading: title insurance and preliminary title reports in California and what LA sellers must disclose.
The Bottom Line
Escrow is the protected middle ground between an accepted offer and getting the keys. A neutral escrow officer holds the money and documents, and everyone works through inspections, loan approval, disclosures, and deadlines until the sale can close. Knowing what to expect at each step makes the process far less stressful.
Buying or selling a home in Los Angeles? I’ll guide you through every step of escrow, track every deadline, and keep you informed until you have the keys, or the proceeds, in hand. Contact me to talk through your plans.
This article is for educational purposes only and is not legal advice. Please consult an experienced real estate attorney.
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