The Real McCoy: Buyers seek clarification on escrow process

By: Kari McCoy, Special to Gold Country News Service
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Dear Kari,

My boyfriend and I just got our offer accepted on the home we wanted most. This is our first home and we are not familiar with the escrow process. Could you please explain what it is and what it means to us as the buyers?


Thank you for your excellent question. Escrow includes several elements which are important for both the buyer and the seller.

A thorough understanding of the escrow process will help you make sound decisions. An escrow is a neutral third party company which facilitates and acts upon mutual instructions received by the buyer, seller and any other parties involved in the transaction. Escrow officers generally work within a title company.

The escrow process begins when buyers and sellers agree to the terms in a purchase contract and the buyer’s earnest money has been accepted by the title/escrow company.

Both the buyer and seller are assigned the same escrow officer and file number. That escrow officer serves as a contact and liaison for both buyers and sellers throughout the entire process.

During the escrow timeframe period, the property will be researched. All the necessary documents will be prepared by the title company.

Part of the research is insuring there are no blemishes on the existing title commonly know in the industry as cloud on title. The buyers will solidify the loan and select the way title will be held.

The purchase contract typically contains the following:

•The buyer’s and seller’s contingencies.

•Clear understanding of who pays for what costs.

•Legal ways in which the contract may be modified or terminated.

•Closing date (the deadline determined and agreed upon by buyers and sellers by which the transfer of title must be successfully completed – in deciding upon the closing date, there should be enough time allowed for all the contingencies to be met).

•Appraisal – in order to secure your loan, the contract usually will contain an “appraisal contingency” to make sure that the home is appraised at the agreed upon purchase price.

•Any discovery of a non-disclosure.

•Discovery of needed repairs.

•Property inspections, such as termite, pool, home, etc.

•Lender conditions.

Once all contingencies have been met, both buyers and sellers will sign a document removing said contingencies from the purchase contract.

Next the buyers and sellers will have separate appointments with the title/escrow company to view and sign the final documents. Amongst the final documents will be the closing statement which is referred to as the HUD-1 form. This is where all the money allocations for buyers and sellers are broken down onto a one page spreadsheet like document.

It is not uncommon for mistakes to occur. It would be wise to review with your Realtor all fees, costs and pro-rations. You should receive copies from the title/escrow company of any and all papers you have signed. Next the title company will receive the buyer’s final funds from the lender.

It is at this time the escrow should be ready to be recorded at the county recorder’s office. At the moment of recording the note and deed of trust, the title is transferred from the sellers to the buyers. Many buyers and sellers are concerned about being out of town on the actual closing date. No worries, neither buyers nor sellers need to be physically present on the actual day of closing. Your savvy Realtor will have made sure that all necessary preparations for a successful closing have been made in advance.

Call Kari McCoy at (916) 941-9540, e-mail her at or visit her website at