Let's look at the high-level events of a typical escrow. This timeline will vary according to the specifications of the contract.
Week 1: The Offer
- The offer is made and accepted.
- Escrow is opened at a title company and the good faith deposit from the buyer is delivered to the Escrow Officer.
- The buyer and buyer's agent review and sign disclosures, order inspections, and notify the lender of the purchase.
Week 2 and 3: Inspections
The buyer receives inspection reports and finishes reviewing disclosures. If any additional work needs to be done to fulfill the requirements of the contract, it is usually done at this time. In addition, the buyer generally increases the good faith deposit (often from 1% to 3% of the purchase price).
Week 4 and 5 : Approvals and Paperwork
The buyer and the buyer's agent do a final walk-through of the home for verification that contract terms are met. Around this time, the loan is approved and the buyer signs the paperwork for the new loan and title transfer. The remaining funds to complete the sale need to be wired, or a cashier's check mailed overnight or hand-delivered to the title company. The lender funds the loan and the new deed is recorded at the County Recorder's office. The escrow officer releases the funds to the seller as necessary, and escrow is closed.
Why purchase Title Insurance?
In Northern California, Title Insurance companies hold most escrows, and buying title insurance is part of every escrow process. Title insurance came about to protect buyers and lenders from problems relating to the title to a property. Since the home you are buying may have changed owners several times, and the land may have gone through many more owners than that, there may be unpaid real estate taxes, liens, or mechanic's liens from many years ago. In the event that something like that comes up, it is necessary to have title insurance to protect yourself and your lender.