How long is the escrow and closing process in California, and what are the various steps that have to occur before closing?
These are common questions among California home buyers, especially first-time buyers who are new to the process. So we’ve created a short guide to help you understand how the escrow process usually works in California.
The Escrow Process Defined
Let’s start with a quick definition. The term “escrow” refers to the time frame and events between contract and closing. It starts when you sign a purchase contract with the seller, and ends when you close on the house.
Several important steps happen during the escrow process in California. They include the home appraisal, inspection, mortgage underwriting, title search, and document preparation. You’ll be directly involved in some of these steps, and less involved in others.
The Steps Between Contract and Closing
Here are the basic steps in the California escrow and closing process:
1. Escrow begins. The process starts when the home buyer signs a real estate purchase agreement / contract with the seller. In most cases, the buyer will also make an earnest money deposit at this point. Initial documents and deposit money are delivered to the escrow agent. In California, it is usually the seller who chooses the escrow company, but that’s not a requirement. The buyer could choose it as well. It just needs to happen so the deal can move forward.
2. Lender orders an appraisal. Once the buyers and sellers have entered escrow, the mortgage lender will order a home appraisal. The appraiser’s job is to determine how much the house is worth in the current market. This helps prevent a situation where the home loan exceeds the value of the property. The appraisal is another important step in the California escrow process, so we’ve created a separate in-depth tutorial to help you understand it.
3. Title search. The “title” is a legal term that refers to ownership. When you have the title to something, you own it. As part of the escrow process, a title company will usually check to ensure that there is a clear chain of ownership, with no liens or court filings that might prevent a sale.
4. Document preparation. The mortgage lender produces a variety of documents relating to the home loan, and delivers them to the escrow agent or company. The escrow agent will check these “loan docs” and other related paperwork to ensure that everything is complete and ready for closing. They will also tally up the buyer’s and seller’s closing costs. A few days before closing, the buyer will receive a disclosure document that shows the amount due at closing. Check out our A-to-Z list of mortgage documents.
5. Time to close! This is the final step in the California escrow process, and the most important. At this stage, the home buyer will provide a check for the closing costs that are due. Buyer(s) and seller(s) will sign a variety of documents relating to the sale. The title or escrow company will update the status of the title to reflect the transfer of ownership. Mortgage documents will be returned to the lender after they’ve been signed, and shortly after that the lender will release the funds.
How Long Does it Take to Close in California?
In California, as in many states, the real estate escrow process can take around 30 to 40 days on average. It can go longer in the case of a more complicated transaction. It can also happen faster, if everything goes smoothly and there are no backlogs.
How long it takes to close escrow in California can vary based on many factors. For example, some homes clear the title search process without any issues. Other properties might have title “defects” (such as a lien or legal judgment) that require additional research. Additionally, a backlog at the escrow company could affect the timeline.
In most cases, however, escrow can be closed successfully within the agreed-upon time frame specified in the contract. It’s only in unusual circumstances that things get delayed to the point of rescheduling the closing.
As a home buyer, the best thing you can do during the escrow process is to stay in close contact with your mortgage company. Also, if any issues or requests for additional information do arise, handle them as quickly as possible. This will help keep the closing on track — which is what everyone wants.
Disclaimer: This is a basic overview of the real estate escrow process and timeline in California. You could encounter additional steps that are not covered above, based on the details of your transaction. The process can vary from one transaction to the next.