What is Real Estate Escrow?

Mike Capelle, Broker/OwnerMike Capelle, Broker/Owner

You’ve negotiated a purchase offer that the other party just can’t refuse. You’re excited to have a deal! But once an offer has been accepted, what happens? What is real estate escrow? Whether you’re buying or selling property, the process can be confusing. Once an offer has been accepted, the transaction then moves into escrow. Escrow is a process that provides for a fair and equitable transfer of property from one person to another. When opening an escrow, the buyer and seller of a piece of property establish terms and conditions for transfer of ownership of that property in the purchase agreement. These terms and conditions are given to a third, impartial party known as the escrow holder. An escrow company acts as a neutral third party and protects the interests of both parties. It also acts as a safe holding place for any documents and funds related to the purchase. The escrow officer is responsible for ensuring that all escrow instructions (terms and conditions for the transfer of ownership) are followed before any exchange of funds and ownership occurs. Once all conditions are met, escrow will be “closed” and the transfer of ownership will be recorded. After the escrow officer receives confirmation of recording, funds can be released accordingly. Below is an escrow timeline and what can be expected of both parties. With Sunset Vista Realty at your side, you can rest assured that the process will go as smoothly as possible.

Timeline of Key Events in a Transaction Using the CA Residential Purchase Agreement (RPA-CA)

Deadline (after Acceptance)

As Soon As Possible

  • Buyer Activity
    • Order buyer-paid reports or inspections.
  • Seller Activity
    • Order seller-paid reports or inspections.
    • Order preliminary title report.
    • Complete seller disclosures as soon as possible, or at time of listing.

3 Calendar Days (or as specified in contract)

  • Buyer Activity
    • If all cash offer, deliver written proof of funds to close.
    • If using loan, deliver written proof of funds for down payment and closing costs.
    • If using loan, deliver prequalification or preapproval letter from lender.
  • Seller Activity
    • If applicable, order HOA documents and disclosures.

3 Business Days

  • Buyer Activity
    • Buyer or Broker gives earnest money deposit to escrow.
  • Seller Activity

3 Business Days + 5 Calendar Days (or as specified in contract)

  • Buyer Activity
    • Sign and return Escrow Holder’s general provisions within 5 days after receipt.
  • Seller Activity
    • Sign and return Escrow Holder’s general provisions within 5 days after receipt.

7 Calendar Days (or as specified in contract)

  • Buyer Activity
  • Seller Activity
    • If applicable, disclose if property is condominium or located in a planned development.
    • Deliver all reports, disclosures, and information for which Seller is responsible.

1-17 Calendar Days

  • Buyer Activity
    • Conduct inspections, review reports and disclosures, request repairs or any other action regarding the property.
    • Deliver written notice of any FHA/VA lender-required repairs or costs that Buyer requests Seller to pay.
  • Seller Activity
    • Make property available for buyer inspections.
    • Seller may respond to Buyer repair requests, but is under no obligation to do so.

17 Calendar Days (or as specified in contract)

  • Buyer Activity
    • In writing, remove the appraisal contingency, or cancel.
  • Seller Activity

17 Calendar Days (or 5 days after receipt by mail (3 days in person), whichever occurs last)

  • Buyer Activity
    • Complete all investigations and review all disclosures and reports received from seller.
    • Deliver applicable written contingency removal, or cancel.
  • Seller Activity

21 Calendar Days (or as specified in contract)

  • Buyer Activity
    • In writing, remove the loan contingency, or cancel.
  • Seller Activity

5 Calendar Days BEFORE close of escrow (or as specified in contract)

  • Buyer Activity
    • Verify condition of property and confirm completion of repairs.
  • Seller Activity
    • If applicable, tenant-occupied property to be vacant.
    • If applicable, seller repairs to have been completed prior to buyer verification of condition.

Close of Escrow

  • Buyer Activity
    • Pay purchase price.
  • Seller Activity
    • Deliver deed.

* Note that when either buyer or seller is unable to perform any contractual obligation by the deadline specified in the purchase agreement, the agreement can be amended to extend deadlines, or a notice to perform can be issued.

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