Get Answers to Commonly Asked Questions About the California Escrow Process
Escrow can be defined as a holding account for money. When negotiating a real estate purchase, a third-party provider, such as a legal office, title business, or escrow company, maintains and manages cash between a buyer and seller, including items like the earnest money deposit and other fees that are related to the transaction.
Escrow is a term that also applies to the procedure that starts when a buyer submits an offer on a property and concludes on closing day (this coincides with when the escrow account opens and closes). Escrow is a notoriously difficult topic to understand, particularly for novice buyers. Keep reading to learn more about the process and remember that Neighborhood Escrow is here to help.
Why is escrow required for buyers and sellers?
Buyers put money into an escrow account before a house sale transaction takes place. Sellers are unable to access the funds until the home transaction is complete, where they are kept securely.
Consider a scenario where a family finds a nice property for sale in a desirable neighborhood and is eager to purchase it. They get in touch with the seller, who tells them to send a check for $25,000 to hold the house while they get a loan as a good faith deposit. The funds are managed by a third party until the sale is completed rather than being given to the seller directly, who could possibly take the money and run.
Escrow has storage capacity beyond a cash deposit. It may also accommodate title protection, origination costs for mortgages, lawyer’s fees, tax on real estate, and homeowners insurance premiums. Escrow shields buyers from deceitful sellers who try to take their money. Additionally, it shields sellers from erratic purchasers who aren’t committed to purchasing the property.
When does the escrow process begin?
When a seller accepts a buyer’s offer on a house, the escrow procedure begins. A good faith deposit, sometimes known as a guarantee of earnest money, is frequently included by buyers with their offer. It demonstrates their sincere desire to proceed with the property purchase.
The buyer’s deposit is sent to an escrow account when the seller accepts the offer. Until closing, when the buyer takes possession and the money can be released, the funds are held in escrow.
How long does escrow take?
The length of the escrow procedure typically ranges from 30 to 60 days, depending on the speed with which all parties (the seller, the buyer, the lender, and the real estate agents) respond and the time required for home inspections and assessments.
The escrow timeline is also affected by a number of additional factors between the offer and acceptance period such as the mortgage lender’s preapproval procedure, scheduling of services such as inspection and appraisal, completion of paperwork on time, finishing up the mortgage underwriting, unexpected occurrences such as family crises or natural disasters, and market circumstances.
For instance, disclosures and inspections can take two or three weeks on their own if you’re buying a home in California and waiting for escrow to settle.
