July 10, 2025 Breaking News, Latest News, and Videos

The Ins And Outs Of Escrow: What Buyers Must Know:

“We are moving here from New York soon, and are confused about how the ‘escrow’ process works here. Can you please explain the relationship between ‘escrow,’ the title company, and whether a closing attorney is generally involved?”

– A soon-to-be

Santa Monica resident

Escrow is a service that provides a home seller and a homebuyer with a means of protection in the handling of funds and documents. Closing attorneys are rarely involved in the transfer of residential real estate in California.

Buyers, sellers, lenders, and borrowers (“the principals”) can conduct business with each other and minimize their risk by using a neutral party, the “Escrow Holder”, as set by The California Escrow Law, Section 17003 of the Financial Code.

Once the seller has received an accepted offer by all parties the California Residential Purchase Agreement and Joint Escrow Instructions, known as the contract, it is then forwarded to the escrow company who will serve as a neutral third party. The escrow officer will serve a neutral intermediary, known as the “Escrow holder.” They ensure no funds or property are transferred until the contract, and its terms have been completely executed or carried out to (a mutually agreed upon) completion.

The escrow holder cannot authorize the closing of the escrow until all parties provide all the necessary documents, disclosures, reports, and funds, minimizing their risk of fraud. The Escrow Officer is required to adhere to the instructions set forth by the principals of an escrow transaction and at the same time, due to the Escrow Officer’s fiduciary role, the Escrow Officer must remain impartial towards all.

The Escrow Officer will prepare escrow documents derived from the residential purchase agreement, and set forth Additional Escrow Instructions. Upon receipt of the preliminary title report that is ordered by the escrow officer, an analysis is conducted by the Title company to determine the exact processes and documents required to complete the transaction and deliver the property to the Buyer free and clear of all liens.

The seller will sign and deposit escrow instructions and other necessary documents. It is imperative the escrow company receives these documents with sufficient processing time to ensure all documents are accurately completed as many forms create different tasks for the escrow officer.

For example, the Grant Deed will need to be notarized, tax information forms like the 1099, 593-C or 593-E will need to be completed with the assistance of your CPA, and the Statement of Identity form will be crossed referenced with the title company to ensure your identity, and no other liens or judgments are filed against your name or other properties.

The Escrow Officer will also request and coordinate addresses, mortgage account information, termite inspection reports, funds, etc.; and fulfill any other conditions specified in the escrow instructions and real estate purchase contract which are necessary to complete the transfer of title.

Upon receipt of all pertinent documents, buyer’s loan funds (if any) and personal funds, the escrow holder will balance their account estimates to ensure accuracy of payment of all fees, bills, etc, before authorizing the legal transfer of title of the property.

The day of recording the escrow officer will receive “confirmation” from the title company that the property has been transferred to the buyer through recordation of the grant deed at the County Recorder’s Office.

The final balancing of funds will be completed after confirmation and exact figures are received and the escrow officer will disburse seller proceeds based the instructions given in the escrow forms.

Michael Edlen has been in the top 1% of all agents nationwide for 25 years and has successfully completed more than 950 transactions. He provides a broad range of real estate counseling and marketing services. He can be reached at 310-230-7373 or at Michael@MichaelEdlen.com. Copies of previous articles are available upon request.

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