What is escrow and how does it work in California?

If you’re new to buying or selling real estate in California, the concept of escrow can seem confusing at first. But it’s actually a straightforward and essential part of every real estate transaction in the state — and once you understand how it works, you’ll appreciate the protection it provides to both buyers and sellers.

When a buyer and seller agree on a sale, neither party wants to hand over their money or their property before they’re certain the other side will hold up their end of the deal. That’s where escrow comes in. An escrow company — a neutral, licensed third party — holds the buyer’s deposit and eventually the full purchase funds in trust, along with all the documents related to the transaction. They only release those funds and complete the transfer when every agreed-upon condition has been satisfied.

In California, the escrow process typically begins as soon as the purchase contract is signed by both parties. The buyer deposits their earnest money into escrow — usually 1–3% of the purchase price — which shows good faith and is applied toward the down payment at closing. From there, the escrow officer coordinates with the buyer’s lender, the title company, the real estate agents, and any other parties involved to collect all necessary documents and funds.

During escrow, several key events happen simultaneously: the buyer completes their inspections, the lender processes the loan, the title company searches for any liens or issues with the property, and both parties review and sign the closing documents. The escrow officer acts as the central coordinator, making sure everything is in order before any money changes hands.

On closing day, the escrow company records the deed with the county, releases the funds to the seller, and delivers the keys to the buyer. In California, the buyer typically pays escrow fees on their side and the seller pays on theirs, though this is negotiable. Blayne Pacelli works closely with trusted escrow companies throughout Los Angeles to ensure every transaction closes smoothly and on time.