You are pre-approved, you found your dream home, and your offer was accepted. At this point, a common question, especially among first-time homebuyers, is how long it will take to close on the home. Here is a short guide to help you understand how the escrow process works in California and how long the closing process may take.
The Escrow Process Defined
The term “escrow” refers to the time frame and events between contract and closing. It starts when you sign a purchase contract with the seller and ends when you close on the house. In California, the closing process is different in northern California versus southern California. The primary difference between the two is escrow instructions are drawn and signed on the front end (shortly after offer acceptance) in southern California and on the back end (just before closing) in northern California. Several steps happen during the escrow process in California that include the home appraisal, inspection, mortgage underwriting, title search, and document preparation. Before any escrow can close, all the terms and conditions of the purchase contract must be met; then the seller deposits the deed and the buyer deposits the funds.
The Steps Between Contract and Closing
1. Escrow begins. The process starts when the homebuyer signs a real estate purchase agreement/contract with the seller. In most cases, the buyer will also make an earnest money deposit at this point. Initial documents and deposit funds are delivered to the escrow agent.
2. Lender orders an appraisal. Once the homebuyer has entered escrow, the mortgage lender will order a home appraisal. The appraiser’s job is to determine how much the house is worth in the current market. This helps prevent a situation where the home loan exceeds the value of the property.
3. Title search. The “title” is a legal term that refers to ownership. When you have the title to something, you own it. As part of the escrow process, a title company will check to ensure that there is a clear chain of ownership, with no liens or court filings that might prevent a sale.
4. Document preparation. The mortgage lender produces a variety of documents relating to the home loan and delivers them to the escrow agent or company. The escrow agent will check these “loan docs” and other related paperwork to ensure that everything is complete and ready for closing. They will also tally up the buyers’ and sellers’ closing costs. A few days before closing, the buyer will receive a disclosure document that shows the amount due at closing.
5. Time to close! This is the final step in the California escrow process, and the most important. At this stage, the homebuyer will provide a check for the closing costs that are due. The homebuyer and seller will sign a variety of documents relating to the sale. The title or escrow company will update the status of the title to reflect the transfer of ownership. Mortgage documents will be returned to the lender after they have been signed, and shortly after that, the lender will release the funds.
How long Does a Home Closing Take?
In California, the real estate escrow process can take around 30 to 40 days on average. It can go longer in the case of a more complicated transaction. It can also happen faster if everything goes smoothly.
How long it takes to close escrow in California can vary based on many factors. For example, some homes clear the title search process without any issues. Other properties might have title “defects” (such as a lien or legal judgment) that require additional research.
In most cases, however, escrow can be closed successfully within the agreed upon period specified in the contract. It’s only in unusual circ*mstances that things get delayed to the point of rescheduling the closing.
As a homebuyer, the best thing you can do during the escrow process is to stay in close contact with your mortgage company. Also, if any issues or requests for additional information do arise, respond as quickly as possible. This will help keep the closing on track – which is what everyone wants.
Adapted from an article on bpfund.com by Mike Trejo.This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice. The material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy.
Copyright 2023 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission.
FAQs
The “closing” is the last step in buying and financing a home. The "closing,” also called “settlement,” is when you and all the other parties in a mortgage loan transaction sign the necessary documents. After signing these documents, you become responsible for the mortgage loan.
What happens during the closing process? ›
The “closing” is the last step in buying and financing a home. The "closing,” also called “settlement,” is when you and all the other parties in a mortgage loan transaction sign the necessary documents. After signing these documents, you become responsible for the mortgage loan.
What are the five steps of the closing process? ›
The Five Steps of Closing: A Homebuyer's Guide
- Starting the Process. ...
- Title Search and Examination. ...
- Document Preparation/Request to Produce. ...
- Settlement/Closing the Transaction. ...
- Post-Closing.
How Long Does Closing On A House Take? Closing on a house can typically take 30 – 45 days. According to an Origination Insight Report by ICE Mortgage Technology, as of September 2021, the average time to close on a home purchase was 50 days.
What are the four steps of a closing process for a home? ›
Overview: The House Closing Process
- Submitting necessary documents.
- Selecting a homeowner's insurance plan.
- Reviewing documents.
- Collecting your cash to close.
- Officially closing on the home.
5 Things to Not Do After Closing Day
- Don't Ditch Your Documents. Closing day will leave you with a pile of paperwork that may be tempting to pack away. ...
- Don't Rush Renovations or Big Purchases. ...
- Don't Fall for Scams. ...
- Don't Be in a Hurry to Refinance. ...
- Don't Ignore Maintenance.
Packing and cleaning needs: As we've discussed above, you'll want to get a head start on packing, cleaning and arranging moving logistics in the days before your official closing. Leaving yourself some breathing room provides some cushion in case of an emergency.
Does closing on a house mean you get the keys? ›
For homebuyers, closing is the day they officially take over ownership of the property and receive the keys. For sellers, meanwhile, closing is the day they'll receive proceeds from the sale. By the time closing arrives, many important steps have to be completed.
Who attends the final walk through? ›
Who Attends A Final Walk-Through? In most cases, the buyer and their real estate agent attend the final walk-through. You shouldn't complete the process without your agent since it's their job to be familiar with the process and the home and to advocate on your behalf.
What is the timeline for closing on a house? ›
On average, closing on a house in California can take anywhere from 30 to 45 days, post-acceptance of an offer. This timeframe is fluid, influenced by the factors mentioned earlier. Each step, from financing approval to inspections, plays a crucial role in the overall timeline.
It is technically possible to close on a home in 30 days, or even less, particularly if you are paying all-cash rather than getting a mortgage or dealing with a homebuying company or iBuyer. But in general, according to data from ICE Mortgage Technology it takes about 44 days to close on a home.
How long do most house closings take? ›
How long does closing take? The average amount of time it takes to close on a home is 42 days. Collecting crucial documents and being on top of your application can speed up the process.
How long before closing did you get clear to close? ›
How Long Does It Take To Close After You've Been Cleared? Most buyers won't have to wait very long to meet at the closing table once they're clear to close. With that in mind, you should expect at least a 3-day buffer between the time you receive your Closing Disclosure and the day you close.
What do lenders do before closing? ›
What do mortgage lenders check for before closing? Because the home purchase process takes time, mortgage lenders will reassess a few key criteria before officially closing on a loan. Some things a lender checks before closing include your credit score, income and debts.
What is the last step before closing? ›
5. Time to close! This is the final step in the California escrow process, and the most important. At this stage, the homebuyer will provide a check for the closing costs that are due.
Why does it take 30 days to close on a house? ›
Purchasing a house is not an overnight task. The process generally takes 30-45 days and covers critical procedures such as securing mortgage approval, getting property appraised, conducting a title search, and more. These steps are vital to completing the home-buying process.
What are the 4 steps in the closing process? ›
The 4 Steps in the Closing Process
- Close revenue accounts to income summary (income summary is a temporary account)
- Close expense accounts to income summary.
- Close income summary to retained earnings.
- Close dividends (or withdrawals) to retained earnings.
It involves identifying and recording all financial transactions, adjusting entries to reflect accurate balances, and closing temporary accounts. The primary goal of the closing process is to summarize financial activities, ensure accuracy in reporting, and facilitate informed decision-making by stakeholders.
Can a deal fall through after closing? ›
There are numerous reasons a deal could fall through on or after closing day, including buyer's/seller's remorse, missing documents, and more. But it's also possible your loan could be denied at the last minute. And you, the buyer, don't have financing, the deal is off.
What occurs on the day of closing? ›
No two closing days look the same, but there are a few key events that will occur. On closing day, you will sign your final closing documents, hand over your closing costs payment, and, once everything has been finalized, walk away with the keys to your new home.
