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The escrow process in the acquisition of real property in California is the transitional stage where the escrow officer, who acts as a neutral third party, manages and coordinates the exchange of information between all of the participating parties as outlined in the purchase agreement with particular attention to the title report, contingency removals and financing compliance.  At this stage, the terms of the purchase agreement can only be modified by the mutual agreement and signed acknowledgment of the buyer and seller.  Without any such modifications, the escrow officer will hold the original purchase agreement as the guiding source. 

When the escrow is opened, which is usually within 24 hours of mutual acceptance of the purchase agreement or the next business day, the buyer is expected to deposit into escrow the amount stated in the purchase agreement as the 'deposit' on the purchase.  This is usually accomplished by a check or wire transfer of funds.  This is an important first stage of the escrow process and to delay in any manner may arouse suspicions of credibility concerns throughout the remainder of the escrow.  Talking points may come up during a Buyer’s discovery process and a renegotiation of the purchase guidelines may be necessary based on discoveries that come to light during the contingency period. 

A title search will be generated and the status of the subject property as given in the title report will be the legal basis on which the transfer of title occurs.  It will contain a legal description of the property, the description of any easements, entitlements, covenants, restrictions, conditions or rights and other matters that may affect or apply to the property.  Read and understand this document.  It may be necessary to obtain legal advice, have the property surveyed or consult with other real estate experts such as architects, county zoning personnel or land use planners to explain and/or resolve items or concepts that could become issues in regard to your planned use and development of the property. 

At this stage of the transaction it will be critical to focus on completing the arrangements for financing.  A timely close of the escrow will be anticipated by the seller and an unexpected delay because the financing approval has been delayed can not only cause havoc in the planned transition of the participating parties but may also jeopardize the entire transaction.  It is better to allow for plenty of time to accommodate the broad number of details that the lender will be reviewing than to respond too casually to an initial review of 'everything looks fine'.  Some of the factors that the lender may take into consideration prior to the loan approval are: structure and capacity of the purchase agreement, disclosure statements and reports, condition and location of the property, environmental reports, inspection reports, title report, contributing source of funds, credit report, appraisal and the general conformity of the property to their lending profile. 

We´ll come back to closing the escrow in a minute but first let´s look at the inspection and contingency periods of the transaction. 


It is possible, reasonable and prudent to investigate any matters that are or could be physically or practically related to the subject property.  These inspections and investigations will be outlined and listed as contingencies in the purchase agreement.  These inspections may include but not be limited to: general and structural elements of the house and any other improvements on the property, dimensions and location of the property boundaries, pest infestation, soil stability and any other geological concerns, waste disposal, water service (especially from private sources), environmental hazards, fire hazards and insurance, building permits for existing structures and additions as well as any personal factors concerning safety and neighborhood conditions. 

The seller 'may' have inspection information to share with the buyer.  Residential properties are recognized in their offering for purchase as being in 'as is' condition.  This simply means that the buyer is put on notice that he/she is responsible for conducting any inspections, research or gathering of information from which they may rely upon to complete the purchase or negotiate with the seller for resolution or remedies to discovered facts that may or may not have an impact on the property´s condition and thus value prior to the close of escrow.  This does not exempt the seller from completing his/her obligations to disclose relative facts and conditions affecting the property of which they are aware. 

Note, that unless specifically agreed to in the purchase agreement, the seller may not be responsible for any repairs to the property nor adjustments to the price or the terms of the agreement.  Any consideration and restitution for discoveries made during the inspection process and subsequent resolution will be conducted separately from the purchase agreement seeking a mutual agreement to this proposal. Once an agreement is reached an amendment to the purchase agreement will be drafted, signed by buyer and seller and incorporated into the transaction.  Sometimes when at this crossroad, the situation becomes a take it or leave it scenario, where you will have to weigh the present and future benefits against the angst and challenges that are immediately in front of you. 


Similar to the consideration of inspections, contingencies can be incorporated into the purchase agreement to cover a broad spectrum of concerns and circumstances.  Time frames for which information is exchanged, inspections, securing financing and completing any residual elements of the transaction will often carry as much weight as the specific matter itself.  Let wisdom and reasonableness be your guide.  Imagine yourself in the seller´s position. Understand where you are prepared to compromise and where you will stand firm.  It will be important that during the contingency periods that you´ll remain focused on understanding the information received and working out the resolutions to the specific areas that have been identified.  Time will pass quickly during the escrow process and inevitably things will come up and adjustments will need to be made accordingly. 

Address issues as they are discovered and work out their resolution.  If appropriate, put it in writing in an amendment.  Once a contingency has been satisfied you will need to sign it off.  Many times a collective number of contingencies expire on the same date; they can be listed and signed off together.  Do not leave a contingency hanging.  The purchase agreement describes the buyer´s and seller´s rights and obligations for dealing with contingencies and should one side ignore the timely process of removing contingencies, the other may initiate a request to perform or proceed with the cancellation of the escrow. 

Closing the Escrow 

The time has come to finalize the transaction.  You´ve completed your inspections of the property, the title report is in order, your financing is in place and you´ve signed off on all of the contingencies.  There will be one last meeting with your escrow officer to finalize the transfer of title and the final review of the accounting of the transaction.  Once the escrow company receives your purchase funds and the title exchange is recorded you now have become the owner of your new property and the transfer is noted in the Santa Barbara MLS.  Welcome home to your new investment in Santa Barbara real estate or Montecito real estate.  Remember to inform the public utility companies and service providers of your change in ownership status so that service will continue without interruption.  Congratulations and enjoy your new property. 

Buying Santa Barbara Real Estate Part 1

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