Escrow is the period of time after a seller has accepted an offer, but before ownership has been transferred.
OPENING ESCROW
Once an offer is accepted, an escrow account is opened with an escrow holder (or escrow agent).
Escrow is a short-lived trust arrangement, a neutral third party responsible for acting in accordance with the escrow instructions, as specified in the purchase contract. Escrow acts ONLY in accordance with escrow instructions, and may NOT make decisions on behalf of the buyer or seller.
Escrow duties include distributing documents and acting as a liaison of communication between parties of the transaction, including the principals (buyer/seller), agents, lender, title company, etc.
DURING ESCROW
During escrow, the seller will provide all property-related disclosures to the buyer.
For buyers, escrow is the period for:
due diligence, which includes inspections and reviewing disclosures
loan underwriting
appraisal
transfer of funds into escrow account
CLOSE OF ESCROW
The date close of escrow (COE) takes place is specified in the purchase contract.
Once the down payment has been received by escrow and the buyer's loan has funded, change of title is recorded at the County Recorder's Office.
This completes the escrow process and ownership of the property has officially changed hands. 🤝
CANCELLED ESCROW
Occasionally, deals may be cancelled, or "fall our of escrow".
A buyer may withdraw from a deal so long as they are within their contingency periods. For example, if the buyer and seller are unable to reach an agreement on credits or repairs after inspections, if the property does not appraise at value, or if the buyer is unable to secure a loan, the buyer may cancel escrow without losing their initial deposit (though escrow cancellation fees may apply).
Once a property is under contract, a seller generally cannot withdraw from the deal (without penalty) unless it is due to non-performance of the buyer. This happens if the buyer fails to fulfill the obligations of their end of the contract. For example, if the buyer fails to transfer funds to escrow or does not release the contractual contingencies on schedule.
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