How Long Does Escrow Take In California - The California Escrow Process

How Long Does Escrow Take In California New California Escrow Process [2023]

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Find out the answer to your question how long does escrow take in California? Learn all about the California and United States escrow process in general.

In the real estate industry, escrow is quite a common word. You may have even heard your real estate agent mentioning the escrow process to you in casual talk, but they did not elaborate, or directly answer all your questions about the whole escrow process in the great state of California.

Escrow is a process that begins immediately after you close a deal on a property, whether to buy or sell it. While the mortgage lenders are aware of what this process is, first-time property sellers and home buyers are not.

Assuming that you are currently thinking of purchasing or selling a property for the first time or if you have already signed a contract, your mind may be pooling with questions right now. This article centers on real estate in California so if your question is how long does escrow take in California, then here you shall find your answer.

But before we directly get into answering this question, let’s discuss the definition of escrow. That will allow you to have a deeper insight into the topic we are going to be discussing in this article.

So, let’s learn the true definition and explanation of the escrow process:

How Long Does Escrow Take In California - The California Escrow Process
How Long Does Escrow Take In California – The California Escrow Process [ Picture Sanfransisco ]

What Is An Escrow Process?

From the information mentioned above, we suppose you can gather that escrow refers to the events that happen from the minute you sign the contract till the moment the deal is closed between you and your mortgage lenders. Everything that happens within this timeframe is regarded as the escrow process.

The word escrow is typically used to define the account that is supposed to hold a large sum of money paid by the buyer. This money is held by a third party until all the conditions mentioned in the contract are fulfilled. Once all these conditions are met, the money is given to the seller.

Third-party institutions tend to hold this amount until the deal is closed to prevent the buyer from backing off once all the formalities in the contract are completed by the seller. This amount is afterward spent in paying taxes and other expenses such as home insurance.

This brings us back to our original question, i.e., how long does escrow take in California? Well, it is not the time to answer that question yet. A more important thing is to first learn about the multiple steps that are involved in this escrow process. So, let’s find that out:

What Are The Steps Involved In The California Escrow Process?

The following sections identify and discuss the important stages of an escrow process. Go through them to learn about this process in detail:

  1. Agreeing Upon an Offer

It takes several days for the buyer and seller to agree upon an offer. The duration of this stage depends on the number of parties indirectly involved in this trade. Once the seller and the buyer have finally settled on an offer, the timeline for the escrow process is opened which leads us to the next stage.

  • Opening of Initial Escrow – Escrow Services

After a purchase price has been agreed upon, the next step is to transfer some amount in the name of good faith to an escrow account. It is simple to determine the amount of money that needs to be transferred.

Transfer Fees: Typically, 1 or 2% of the total amount is transferred to the escrow account. In more competitive areas, this percentage could increase up to 10%. This payment must be made in cash and should be done as soon as possible.

It provides the seller a sense of assurance so he can proceed with other formalities without worrying about the buyer backing off at the last moment. In California, the escrow company is picked by the seller, however, there is no obligation to this rule.

The buyer can also choose a company, or both the seller and buyer can mutually pick an escrow agent or escrow companies to transfer the amount to.

  • Occurrence of Home Inspection

A home inspection is quite necessary before selling it. The purpose of this inspection is to find out the true market value of the property. This appraisal is ordered by the lender so to assure that the loan amount is not more than the value of the property.

Apart from finding out the market value of the property, the home inspection is also done to identify if there are any structural lacks in the building or if there are any other problems such as pests or irregularities of utilities like water or electricity.

In the Californian escrow process, a title search is also carried out to ensure that the chain of ownership is clear. This helps list out all the possibilities that could cease the sale from happening.

The inspection process itself takes no more than a day. If it is completed without any objections, then you are free to move to the next stage. However, if any issues are found during the inspection, it might take several days or weeks to resolve them. Once these problems are solved, only then you can apply for the next step.

  • Buyer Receiving Approval for Loan

In order to seek approval, the new owner is supposed to submit his financial information such as the bank statements to prove his eligibility to get the loan. This is also called mortgage underwriting.

The purpose of this step is to make sure that the buyer will not run out of funds after the documents have been signed. For a smoother process, all the documents requested by the lender should be submitted to them within the given timeframe.

After this is done and the documents have been verified, the buyer will receive the approval in a couple of days.

  • Completion of the Lender Funding

The lender funding is completed after almost a month of the first stage. So far, the answer to your question, i.e., how long does escrow take in California is more than 30 days. Final lender funding takes time to complete since it requires other things to be cut off the checklist beforehand.

These things include repairs, resolving the objections raised by the appraiser, and the final maintenance. After these things are settled, the lender funding can be completed without any obstacles. However, during this stage, the buyer cannot switch his credit accounts or change his job.

  • Close Of Escrow The Final Closing Costs and Walk-Through

This stage is completed less than a week before the typical closing costs of the deal. All parties including the buyer, the home sellers, the real estate agent, and an attorney sit down together with the mortgage information provided by the lender. They then put things in motion to ensure a smooth legal exchange of documents and the final closong costs of the sale.

*Keep in mind if you have a real estate attorney there will be attorney fees paid by the buyer.

  • Ownership and Title Transfer [ Closing Costs ]

This is the final stage of the escrow process that happens on the last day of the timeline. During this stage, the buyer clears all the remaining dues by providing a check for the amount. All the necessary documents regarding the sale are signed by the buying and selling parties after the exchange of funds.

Title Company: The transfer of ownership is indicated by updating the title or status. The lender receives the mortgage documents back after the signatures and releases the funds in a couple of days.

So, how long does escrow take in California? Let’s finally discover the answer to your question on how long does escrow take in California:

How Long Does Escrow Take in California?

With the information mentioned above, it is quite easy to conclude that it takes around 30 to 40 days to complete the escrow process in California. And just by the way, the process is the same in many other states as well so 30 to 40 days is a normal timeline for the escrow process to complete.

However, this answer to how long does escrow takes in California is not true in all conditions. There are certain circumstances that one might encounter that could hinder this process. Let’s give you a brief rundown on what these problems could be:

Possible Problems in California Escrow

  1. Hurdles in Getting Loan Approval

Lending policies have gotten stricter with time. Nowadays, it is quite tough to receive a pre-approval affecting the timeline of how long does escrow takes in California. 

  • Defects in Title

After the title search is carried out if the results come with any inaccuracies it could take weeks to get it corrected.

  • Unsuccessful Home Inspection

If the home inspection is not approved, resolving all the objections can further delay the California escrow process. 

How Long Does Escrow Take in California? Conclusion

So, if you have been wondering how long does escrow take in California, we hope you got your answer. But remember, 30-40 days is just an average time given that everything else goes smoothly. If not, the California escrow process can take longer!

Good luck with your new California home, I hope your escrow process goes smoothly, so you can enjoy the California sunshine in your new home.

Jay signing out from sunny San Diego, California.

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