What Happens in Escrow When I Buy My First Home in California?

What happens in escrow when you buy your first home in California? In plain terms, a neutral third party holds the money and paperwork until every condition in your purchase contract is met.

I'm Jeanette Nelson, a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas. I walk first-time buyers through each step of escrow so nothing on the calendar is a surprise.

The California Department of Real Estate (DRE) calls escrow the most common way real estate is bought, sold and refinanced in the state. The escrow officer is neutral. They don't represent you or the seller, don't negotiate your contract, and can't give legal advice. They act only on written escrow instructions signed by both sides.

Independent escrow companies are licensed by the California Department of Financial Protection and Innovation (DFPI) under the state's Escrow Law. The DRE also notes that in Southern California, escrow and title are usually handled by two separate companies.

According to the DRE, escrow usually opens when the fully signed purchase agreement is delivered to the escrow holder. Your good faith deposit may go in at the same time or shortly after, as your contract states. The escrow officer then assigns an escrow number, orders a title search, and prepares instructions for you and the seller to sign.

One safety habit matters here. Before you send any money, call your escrow officer at a phone number you already know is real, not one in an email, and confirm the wiring instructions out loud. If an email ever says the instructions changed, stop and call first.

This is your review period. The seller delivers required disclosures about the home's condition and known issues. Under California Civil Code Section 1102.3, if a required disclosure arrives after you sign your offer, you have three days after delivery in person, or five days after delivery by mail or electronic delivery, to terminate in writing. Your contract may give you more time for other reviews.

Meanwhile, you schedule your inspections. A general home inspection is the starting point, and the inspector may recommend others, like a roof or sewer line inspection. If you have questions about permits, we check them for that specific property.

Your contract lists contingencies, which are conditions you can rely on before you're fully committed. Common ones cover the inspections and disclosures, the appraisal and the loan. Each has its own deadline in your contract. When you remove a contingency, you give up that protection, so we talk through each one before you sign anything.

If the inspection finds something, you may ask for a repair, a credit, or a price change. The seller can say yes, no, or counter.

Your lender orders an appraisal to confirm the home's value supports the loan. Underwriting reviews your income, assets and credit, and may ask for more documents.

During escrow, keep your finances steady. Talk to your lender before you open new credit, change jobs, or move large sums of money.

Your lender also asks for proof of homeowners insurance before closing. The DRE notes that buyers getting a loan need a policy the lender accepts, so start shopping early.

The Consumer Financial Protection Bureau (CFPB) requires lenders to give you your Closing Disclosure at least three business days before closing. It shows your final loan terms and your cash to close. Compare it to your Loan Estimate and ask about anything that changed. Those three days are your time to fix problems before signing.

The CFPB suggests walking through the home before closing to confirm agreed repairs were done and that items the seller agreed to leave are still there. If something is off, we raise it right away.

Then you sign your loan documents, usually in front of a notary, and send your closing funds. The DRE explains that escrow often needs a wire or cashier's check, because funds must be cleared before documents can record.

Once the lender funds and every condition is met, the title company sends your deed to the Orange County Clerk-Recorder. The DRE notes recording often happens the business day after funding. After recording, escrow pays everyone and sends a final closing statement, and you get your keys as your contract provides.

If you're thinking about buying your first home, I'd love to walk you through escrow before you ever write an offer. Call or text me at 714.366.8575 | DRE: 01397168, or contact me. Jeanette Nelson is a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas.