Escrow Basics

A primer on the escrow process.

Welcome to Escrow Basics, your go-to guide from Lakeside Escrow for understanding how escrow works and why it’s essential in real estate transactions. Whether you're buying your first home, selling a property, or just curious about the process, this page will walk you through the key concepts, terms, and steps involved. At Lakeside Escrow, we believe that informed clients make confident decisions — and we’re here to make every part of your escrow experience clear, secure, and stress-free.

Lakeside Escrow at the Beach

What is escrow?

In simple terms, escrow is a neutral third party that holds funds and documents related to the real estate transaction until all conditions of the sale are met. This protects both the buyer and the seller, ensuring that no funds or property change hands until everything is in order. For all transactions, escrow plays a particularly vital role due to the specific complexities involved.

 

Key Stages and Expectations During Escrow

1

Offer & Acceptance

  • Buyer makes an offer on the property.
  • The seller accepts the offer (or negotiates until both parties agree on terms).
  • Once both parties sign a purchase agreement/contract, they open escrow.

2

Open Escrow

  • An escrow is established with a neutral third party (often an escrow or title company).
  • The buyer typically deposits “earnest money” (good-faith deposit) into the escrow according to the terms of the purchase contract.

3

Escrow Instructions & Documentation

  • The escrow officer adheres to the agreement set forth in the purchase contract and gathers any other additional information from the parties to create the formal escrow instructions.
  • Both buyer and seller review and sign these instructions.

4

Preliminary Title Report/
Title Search

  • The title company performs a title search to confirm any items that may be against the subject property (including, but not limited to property taxes, loans, liens and judgements).
  • A preliminary title report or title commitment is then issued summarizing the findings.
  • If any title issues are found (e.g., liens, encroachments), the seller must work to clear them before closing.

5

Inspection & Contingencies

  • The buyer arranges for an inspection (and possibly other specialized inspections.)
  • The buyer typically reviews and approves the inspection results within a contingency period. If issues arise, the buyer may be able to negotiate repairs, request credits, or cancel the deal under certain contingency clauses.

6

Loan Application & Financing

  • The buyer completes their mortgage application and works with the lender to satisfy any documentation requirements.
  • The buyer’s lender orders the appraisal and conducts underwriting.
  • Once underwriting is approved, the lender issues a loan commitment (final approval).

7

Satisfying Remaining Conditions & Reviewing Documents

  • Both parties work on meeting all contractual obligations (e.g., repairs, providing documents, satisfying disclosures).
  • All contingencies shall be met or waived by their respective deadlines.

8

Final Review &
Closing Preparation

  • Once all conditions are met, the escrow officer prepares the closing documents (for financed deals in compliance with federal regulations).
  • The buyer reviews all financial documents and ensures the final loan terms and closing costs are correct.

9

Final Walk-Through

  • Shortly before closing, the buyer usually conducts a final walk-through of the property to confirm it is in the agreed-upon condition and that any negotiated repairs have been made.

10

Signing Closing Documents

  • The buyer and seller (often separately) sign all final documents.
  • The buyer provides the remaining funds (down payment, closing costs) to escrow.
  • The lender (if applicable) funds the loan.

11

Closing & Recording

  • Once funds are verified, the title company records the deed (and mortgage, if applicable) with the county.
  • Recording officially transfers title from the seller to the buyer.
  • The seller receives their net proceeds from the sale.

12

Post-Closing

  • After closing, the buyer receives the keys (or gains possession per the contract).
  • The title company issues the title policies in accordance with the purchase agreement.
  • Any leftover documents or funds held in escrow (if needed for certain post-closing tasks) are disbursed according to the escrow instructions.

Key Takeaways

 
1

Escrow is a neutral process to protect both buyer and seller until all terms of the sale are fulfilled.

2

Earnest money in escrow signals the buyer’s good faith.

3

Clear title is essential; any liens or claims must be resolved before closing.

4

Inspections, appraisals, and financing approvals are critical milestones.

5

Final closing involves reviewing and signing all paperwork, disbursing funds, and officially recording the transfer of ownership.

I have closed many real transactions throughout my career and have had my fair share of experience with all sorts of escrow companies. I will never use any other escrow officer except for Eric. He mirrors my work ethic by being honest, transparent, and on top of each transaction like a hawk.

Arbi B.

Connect with us

We would love the opportunity to connect with you and discuss how Lakeside Escrow can assist with your escrow needs and help ensure a smooth and efficient escrow process.