Understanding the Escrow Process: What Happens Between Offer and Closing in Los Angeles
For many Los Angeles buyers and sellers, the most stressful part of a real estate transaction is not finding the property or negotiating the price — it’s what happens after the offer is accepted.
The escrow period is where the real work happens.
Money moves. Inspections occur. Disclosures are reviewed. Lenders verify everything again. Appraisals can challenge value. Timelines matter. Contingencies expire. One missed step can create delay or even collapse a deal.
Understanding the escrow process isn’t just helpful — it’s strategic. The more clearly you understand each phase, the more confident and protected you’ll be between contract acceptance and closing day.
Let’s walk through it step by step, specifically through the lens of Los Angeles real estate.
What Is Escrow, Exactly?
Escrow is the neutral holding period between accepted offer and closing.
A third-party escrow company holds:
The buyer’s deposit (Earnest Money Deposit)
All signed documents
Funds from the lender
Instructions from both parties
Escrow ensures that no money or property changes hands until all contractual obligations are satisfied.
In Los Angeles, escrow periods typically range from 21 to 30 days, though shorter and longer timelines occur depending on financing and negotiation strength.
Step 1: Offer Acceptance and Opening Escrow
The escrow process officially begins once:
Buyer and seller sign the purchase agreement
All counteroffers are finalized
Escrow is “opened”
Within 1–3 business days:
The buyer wires the Earnest Money Deposit
Escrow provides instructions to both parties
The clock starts on contingency timelines
This is where serious momentum begins. The first few days are critical.
In competitive Los Angeles markets, buyers often shorten contingency periods to strengthen their offer. That makes early organization essential.
Step 2: The Initial Deposit (Earnest Money)
The Earnest Money Deposit (EMD) is typically 3% of the purchase price in Los Angeles.
This deposit:
Shows the seller you are serious
Is held in escrow
Applies toward your down payment at closing
The deposit is protected by contingencies (inspection, appraisal, loan) during the agreed timeframe. Once contingencies are removed, that deposit becomes at risk.
This is why understanding timelines matters so much.
Step 3: Disclosures Are Delivered and Reviewed
California is a disclosure-heavy state.
Within the first week of escrow, the seller delivers disclosure documents that may include:
Transfer Disclosure Statement (TDS)
Seller Property Questionnaire (SPQ)
Natural Hazard Disclosure (NHD)
Lead-based paint disclosure (if applicable)
HOA documents (if applicable)
These documents reveal known material facts about the property.
Reviewing disclosures is not just a formality — it can directly impact your inspection strategy and negotiation leverage.
For sellers, strong preparation before listing reduces surprises during this phase. You can read more about that in Preparing Your Los Angeles Home for Today’s Buyers
Surprises during escrow create renegotiation.
Step 4: Inspections
Buyers typically complete inspections within 7–14 days, depending on the negotiated timeline.
Common inspections in Los Angeles include:
General home inspection
Termite inspection
Sewer line inspection
Roof inspection
Foundation inspection (if older property)
Pool inspection (if applicable)
In hillside neighborhoods like Hollywood Hills or parts of Pasadena, additional geological or structural inspections may be prudent.
Inspections serve two purposes:
Identify material defects
Confirm the buyer’s comfort with the property condition
After inspections, buyers may:
Accept property as-is
Request repairs
Request credits
Cancel escrow (within contingency period)
This is often the most emotionally charged moment in escrow. The tone and structure of the initial offer — especially pricing strategy — significantly influence negotiation power here. For sellers, pricing correctly from the beginning protects leverage later in escrow. Learn more in Pricing Your Los Angeles Home Correctly in 2026
Step 5: The Appraisal
If the buyer is obtaining financing, the lender orders an appraisal.
The appraiser evaluates:
Comparable recent sales
Condition
Location
Market trends
Property features
The appraisal must support the contract price.
If it comes in:
At value → Escrow continues smoothly
Above value → Buyer gains equity
Below value → Renegotiation may occur
Low appraisals can trigger:
Price reduction
Buyer covering appraisal gap
Deal cancellation
Accurate pricing from the beginning reduces appraisal risk — another reason preparation before listing matters.
Step 6: Loan Underwriting
During escrow, the lender verifies:
Income
Employment
Assets
Credit
Debt ratios
Property appraisal
Even pre-approved buyers go through full underwriting during escrow.
Underwriters may request additional documentation at any point. Prompt response is critical.
This is not the time for buyers to:
Open new credit accounts
Change jobs
Make large purchases
Move funds without documentation
Final loan approval is typically issued a few days before closing.
Step 7: Contingency Removal
Most Los Angeles purchase agreements include:
Inspection contingency
Appraisal contingency
Loan contingency
Each has a specific deadline.
When a buyer removes contingencies:
The deposit becomes non-refundable (barring extreme circumstances)
The transaction becomes firm
Seller confidence increases
Strategically, contingency removal timing matters.
Strong buyers in competitive markets sometimes shorten contingency periods to strengthen their offer. However, this increases risk if due diligence isn’t completed carefully.
Understanding your risk tolerance is critical before removing contingencies.
Step 8: Title and Escrow Review
Escrow and title companies conduct a title search to confirm:
Legal ownership
No undisclosed liens
No unresolved claims
Clear transferability
If issues arise (e.g., unpaid liens, easement disputes), they must be resolved before closing.
Title insurance is issued to protect the buyer (and lender) against future claims.
This step often happens quietly behind the scenes, but it’s essential.
Step 9: Final Walkthrough
Typically scheduled 3–5 days before closing.
The buyer confirms:
Property condition matches contract
Agreed repairs are completed
No new damage occurred
Fixtures remain as agreed
The final walkthrough is not a second inspection — it is a verification that the property remains in substantially the same condition and that agreed repairs were completed. If material issues arise, they should be addressed before closing funds are released. While minor issues do not give a buyer the right to cancel after contingencies are removed, a significant failure to maintain the property or perform agreed repairs may constitute a breach of contract.
Step 10: Signing
Buyers and sellers sign final escrow documents separately.
Buyers sign:
Loan documents
Closing disclosure
Escrow instructions
Sellers sign:
Grant deed
Closing statements
Transfer documents
Signing does not mean ownership has transferred yet.
Ownership transfers when:
Funds are wired
Loan is funded
Deed is recorded with the county
This is called “recording.”
Step 11: Closing and Recording
Escrow records the deed
Keys are released
In Los Angeles, recording usually happens in the afternoon.
Once recording is confirmed: The transaction is complete.
Common Escrow Delays in Los Angeles
Even smooth transactions can face delays. Common causes include:
Appraisal gaps
Lender document requests
HOA document delays
Title issues
Repair negotiations
Wire timing issues
Proactive communication reduces risk. Experienced coordination matters here more than at any other stage.
Reducing Escrow Friction Before You List
Many escrow complications trace back to inadequate listing preparation.
Before listing, sellers should:
Remove personal distractions
Address deferred maintenance
Organize documentation
Anticipate disclosure questions
You can read more about that in 7 Ways to Depersonalize Your Home Before Selling in Los Angeles
Escrow success is rarely accidental. It is usually the result of disciplined preparation.
Final Thoughts
Escrow is not a mystery period where things “just happen.”
It is a structured, deadline-driven process designed to protect both parties — if navigated properly.
Between offer and closing, there are dozens of moving pieces:
Financial
Legal
Structural
Emotional
Understanding each step removes fear and replaces it with clarity. Whether you are buying your first property or selling a long-held home, the escrow period is where preparation, pricing strategy, and negotiation discipline converge. And in Los Angeles real estate, confidence is leverage.
