What Is Escrow In California? A Plain-English Guide

Buying a home in Los Angeles? You will hear the word escrow early and often. It can feel like a black box when you are wiring funds and signing stacks of paperwork. This guide explains escrow in California in plain English so you know what happens, who does what, and how to keep your LA purchase on track. Let’s dive in.

Escrow basics in California

Escrow is a neutral process that holds money, documents, and instructions until both buyer and seller meet the terms of the purchase contract. In California, escrow services are commonly provided by escrow companies, title companies, or banks. Many firms offer both title insurance and escrow under one roof.

Here is what escrow typically handles for you:

Receives and safeguards deposits, loan funds, and seller proceeds.
Orders or receives key documents like the preliminary title report, payoff statements, and deed.
Prepares escrow instructions and a final settlement statement that shows who pays what.
Coordinates title insurance, recording with the county, and disbursement of funds after recording.
Confirms your lender’s requirements are met before funding your loan.

Just as important, here is what escrow does not do:

Escrow officers do not give legal, tax, or lending advice. They follow the written instructions from you, the seller, and your lender.
Negotiation and contract changes happen with your real estate agent or attorney. Escrow implements the final signed instructions.

Who does what in LA escrow

Key participants

You, the buyer. You sign the purchase agreement, deposit earnest money, complete loan steps, remove contingencies as required, and sign closing documents.
Seller. Provides required disclosures, delivers clear title, signs the deed and seller documents, and pays off existing liens.
Escrow officer. Runs the file, prepares settlement statements, coordinates signing and recording, and holds money in trust.
Title company. Issues the preliminary title report, helps clear title issues, and provides title insurance policies.
Lender. Processes and underwrites your loan, issues your Closing Disclosure, and wires funds to escrow when conditions are met.
Real estate agents. Guide you, coordinate documents, and help negotiate timelines, repairs, and credits.

Documents you will see

Purchase agreement. The CAR Residential Purchase Agreement sets deposits, deadlines, and contingency periods.
Preliminary Title Report. Lists liens, easements, and exceptions that must be understood and cleared as needed.
Seller disclosures. The Transfer Disclosure Statement and Seller Property Questionnaire are required under California law.
Natural Hazard Disclosure report. Indicates if the property is in areas such as flood, fire hazard, or earthquake fault zones.
HOA documents if buying a condo or townhome, including CC&Rs and financials.
Pest and wood-destroying organism reports. Common in California. Lenders often require termite clearance before funding.
Loan Estimate and Closing Disclosure. Federal disclosures for mortgage buyers. You must receive the Closing Disclosure at least three business days before closing.
Deed. Usually a Grant Deed in Los Angeles County, recorded to transfer ownership.
Settlement statement. A final accounting of all buyer and seller costs and credits.

California and LA specifics

Sellers must deliver required disclosures under state law. Read them early and ask questions.
Title insurance rates are regulated. Your title company can explain owner and lender policies.
Transfer tax rules vary by city within LA County. The City of Los Angeles has its own documentary transfer tax in addition to county tax. Who pays what is negotiable and should match your contract and escrow instructions.

Deposits, contingencies, and timeline

Earnest money deposit

Your earnest money deposit shows good faith and is held in escrow. The timing and amount are set in your contract. In California, the initial deposit is often due within a few business days of acceptance. In competitive LA markets, sellers may expect larger deposits. Additional deposits can be negotiated later in escrow.

Common contingencies

Inspection. You can order inspections, negotiate repairs or credits, or cancel within the agreed period.
Loan. Protects you if your final loan approval does not come through on time.
Appraisal. Tied to your lender’s requirement that the property appraise at or above the price.
Title. Lets you review the preliminary title report and request clearance of issues.
HOA review. Gives you time to review HOA documents and cancel within the period if needed.
Other. Sale-of-home contingency, pool or septic inspections, and more as negotiated.

Typical time ranges in Los Angeles

These are common ranges, but your contract controls the actual days:

Inspection and consultant review: about 10 to 17 days after opening escrow.
Loan contingency and approval: about 17 to 21 days, sometimes up to 30 days depending on financing.
HOA document review: often 3 to 10 days, depending on HOA turnaround.

Buyers sometimes shorten contingencies to be more competitive. Balance speed with enough time to do proper due diligence.

The step-by-step flow

Offer accepted and escrow opened. You send the signed contract and initial deposit to escrow.
Escrow opens the file, deposits funds, and orders a preliminary title report. Seller starts disclosures.
You schedule inspections and begin reviewing disclosures and HOA documents.
Your lender orders the appraisal and continues underwriting.
You negotiate any repairs or credits, then remove contingencies or cancel within the periods.
After final loan approval, you receive your Closing Disclosure at least three business days before closing.
You sign closing documents at escrow. Your lender wires funds when conditions are met.
Escrow records the deed with Los Angeles County, disburses funds, and you get the keys.

Closing day in Los Angeles

What to expect

Plan a final walk-through a day or two before closing to confirm the home’s condition. Sign your closing documents in person or by permitted electronic methods, depending on what escrow offers. After your lender funds, escrow records the deed and any loan documents with the Los Angeles County Recorder. Keys are typically released after confirmation of recording and funding.

Electronic signing and e-recording are increasingly common in LA County. Availability depends on the escrow or title company and the Recorder’s acceptance. Ask early so you can plan your signing.

Typical buyer costs

Your settlement statement will itemize fees. As a buyer in LA you will typically see:

Loan costs. Origination, appraisal, credit report, and the lender’s title policy.
Title and escrow fees. Title insurance premiums and escrow company fees.
Recording and transfer taxes. County recording fees and documentary transfer taxes, including any city tax such as the City of Los Angeles tax. Who pays is negotiable.
Prepaids and reserves. Homeowners insurance, prorated property taxes, and any impound account amounts required by your lender.
Inspections and pest reports. Buyers usually pay for inspections. Pest treatment or repairs depend on negotiations and lender requirements.
HOA fees for condos. Move-in fees or transfer fees may apply.

Who pays what in LA

Local custom often looks like this, but it is negotiable and must match your contract:

Seller often pays the owner’s title policy.
Buyer typically pays the lender’s title policy.
Escrow fees may be split or allocated by agreement.
Transfer taxes can be paid by the seller, split, or allocated another way based on the deal.

Ask escrow for an early estimate so you know your expected funds to close. Update it as you approach signing.

Common roadblocks and how to stay on track

Frequent issues in LA escrows

Low appraisal. Your lender will not fund above appraised value. You may renegotiate, bring more cash, or cancel if your contingency allows.
Loan underwriting delays. Missing documents, job changes, or new credit lines can stall approval.
Title problems. Liens, judgments, or easement issues must be cleared before closing.
HOA document delays. Waiting on HOA packages can push contingency deadlines.
Pest and termite findings. Lenders often require termite clearance. Repairs can take time.
Late or incomplete disclosures. Missing details can lead to disputes or delays.
Recording hiccups. Document errors or county backlogs can delay final transfer.

Ways to reduce risk and delays

Read your contract deadlines on day one and calendar them.
Send lender documents quickly and avoid major financial changes during escrow.
Order inspections immediately and review reports right away.
Read the preliminary title report early and ask how any liens or exceptions will be handled.
If pest evidence is likely, schedule a termite inspection and request repair estimates early.
Keep communication tight. Ask escrow for an estimated closing statement and a “what’s left” checklist about a week before closing.
Use contingencies that fit your risk tolerance, then remove them only when you are satisfied.

Smart questions to ask escrow

Can we use electronic signing and will LA County accept e-recording for my file?
When will I receive an estimated settlement statement, and how often will it be updated?
What are the wire instructions and security protocols for sending funds?
Who is paying each fee, such as title policies, escrow fees, and transfer taxes, based on our contract?
What are the key dates for deposit, contingencies, loan documents, and signing?
If title issues appear, what is the plan and timeline to clear them?

Ready to move forward?

Escrow does not have to feel mysterious. With a clear plan, tight communication, and the right team, your Los Angeles purchase can move from offer to keys with confidence. If you want a calm, step-by-step guide through escrow and the local nuances of LA County recording, disclosures, and timelines, we are here to help.

When you are ready, connect with the Backbeat Homes - Clarkliving Team to plan your next steps.

FAQs

What is escrow in a California home purchase?

Escrow is a neutral process that holds money, documents, and instructions and only releases funds and records the deed after all contract conditions are met.

How long does escrow take in Los Angeles?

Many financed purchases close in about 30 to 45 days, with 21 to 30 days possible in strong markets. All-cash deals can close in under two weeks if title is clear and everyone is ready.

When do I get the Closing Disclosure in LA?

For mortgage loans, federal rules require that your lender deliver the Closing Disclosure at least three business days before closing.

What happens to my deposit if I cancel during escrow?

It depends on your contract and contingencies. If you cancel within an active contingency period, your deposit is typically refundable. Outside contingency periods, remedies depend on the agreement and instructions.

Who pays transfer taxes and title insurance in Los Angeles?

It is negotiable. Commonly, sellers pay the owner’s title policy, buyers pay the lender’s policy, and transfer taxes are allocated by local custom or contract. Confirm in your agreement and escrow instructions.

Can I sign and close remotely in LA County?

Electronic signing and e-recording are increasingly common. Availability depends on the escrow or title company and county acceptance. Confirm early with your escrow officer.

What inspections are typical and who pays for them?

General home and pest or termite inspections are common. Buyers usually pay for inspections, and lenders often require termite clearance before funding in California.