What Is Escrow and How Does It Work in California?

If you have not sold a home in ten or twenty years, escrow probably looks like a black box. Money goes in. Documents pile up. Forty-five days later, something happens and your keys are gone. That is not quite how it works. Here is the plain version.

Escrow is a neutral holding account run by a third party, usually a title company or escrow company, that sits between you and the buyer. Once you have an accepted offer, everyone sends their money and their paperwork to escrow. Escrow holds it all until every condition in the contract has been met. When the last condition clears, funds move to you and title moves to the buyer. The deal closes.

In California, escrow is standard on nearly every real estate sale. It protects both sides.

In Southern California, the seller typically chooses the escrow company and the title company. Sometimes they are the same company. Sometimes they are separate. I open escrow by sending the signed purchase agreement to the company you choose, and the buyer sends the earnest money deposit to that company.

The escrow officer assigns you an escrow number and sends opening instructions to both sides. From that point, they are your neutral point of contact for the entire transaction.

Think of escrow as a checklist. Every item must be completed before the funds move. A typical Southern California escrow checklist looks like this:

• Buyer deposits earnest money
• Preliminary title report is ordered and reviewed
• Seller delivers mandatory disclosures, including the Transfer Disclosure Statement, Natural Hazard Disclosure, and others required by California law
• Buyer completes their inspection period and removes the inspection contingency
• Appraisal is completed if the buyer is financing
• Buyer's lender issues a loan commitment letter and removes the loan contingency
• Both sides sign final closing documents
• Buyer funds the loan
• Escrow records the deed with the county
• Funds are released to the seller

Not every transaction has every one of these steps, and the sequence can vary. But this is the shape of most closings in Los Angeles County.

Sellers are often surprised how active this period is, even if it feels like a waiting game. Here is what you will typically be doing:

Sign disclosures early. California sellers must complete the Transfer Disclosure Statement, Seller Property Questionnaire, and several other forms. I walk you through each one. Do not rush through them. Wrong disclosures are a common source of post-closing disputes.

Respond to inspection requests. After the buyer's inspection, they may request repairs or credits. You have several choices: complete the repairs, offer a credit, or hold firm. I will advise you on which response makes the most sense given the buyer's overall strength and the remaining contingencies.

Show up on your sign date. A few days before closing, escrow will schedule you to come in and sign the deed and final documents. Bring a valid ID. This meeting usually takes about an hour.

Hand over keys on the close date. Once escrow confirms recording, the sale is done. The buyer takes possession at the time specified in the contract, usually by 5 or 6 PM on the close date.

Most escrows close on time without drama. A few things can create delays or require quick decisions:

Title issues. Liens, unpaid property taxes, or ownership questions can surface in the preliminary title report. These need to be cleared before escrow can close. Most are routine, but a few take time.

Low appraisal. If the buyer is financing and the appraisal comes in below the purchase price, you and the buyer will need to work out the gap. Options include renegotiating the price, having the buyer increase their down payment, or canceling the contract if you cannot reach agreement.

Loan delays. Lenders can request more documentation or, rarely, deny the loan late in the process. A buyer with a genuine pre-approval and a reputable lender reduces this risk. This is one reason the strength of an offer matters more than the headline number. When I review offers for sellers, I look at financing quality as carefully as I look at price.

The standard escrow period on a financed offer in Los Angeles County is 30 to 45 days. Cash offers can close in as few as 10 to 14 days if both sides are ready. Transactions involving estates, trusts, or title complications can take longer.

At the close of escrow, these costs are deducted from your proceeds before the wire goes to you: agent commissions, escrow fees, owner's title insurance, county and city transfer taxes, any seller credits agreed to in the contract, prorated property taxes, and payoff of any existing mortgage balance plus per diem interest. If you want to see all of this laid out before you even list, start here: cost of selling a home in Westside Los Angeles.

Once recording is confirmed, funds wire to your account, usually the same day or the following morning. Keep copies of all closing documents. Your accountant will likely want the final settlement statement, particularly if you have lived in the home for many years and need to work through the capital gains rules. More on that here: capital gains tax on a long-held Los Angeles home.

If you are getting ready to list and want to walk through the full sale process from pricing to close, book a consultation. I handle everything from opening escrow to handing over keys. No pressure, just real answers.

If you are weighing a sale on the Westside, the useful first conversation is not about a listing price. It is about what your home needs, what it will cost, and what it is likely to return. First Key Pacific is my practice, and I walk the property before anyone spends a dollar. Tell me about your home and we will start there.