Put this lesson to work
Use what you learned to review current opportunities, or ask a property-specific question before you make a decision.
What you will learn
- Why escrow protects both the buyer and seller.
- What happens after the purchase agreement is accepted.
- How earnest money, title review and due diligence fit into the process.
- When contingencies are removed and ownership transfers.
- Why buyers should ask questions throughout escrow.
Escrow is more than paperwork. It creates a structured process that helps protect everyone involved while money, documents, title matters and the terms of the purchase agreement are completed.
Step 1 — Opening escrow
Once the buyer and seller agree on the purchase price and terms, the purchase agreement is sent to an escrow or title company. The escrow officer opens the transaction and begins gathering the documents and information needed to complete the sale.
Step 2 — Depositing earnest money
In many transactions, the buyer deposits earnest money into escrow. This shows the seller that the buyer is serious about completing the purchase.
The funds remain in the escrow account and are generally applied toward the purchase at closing, subject to the terms of the purchase agreement.
Step 3 — Reviewing title
The title company researches the property's ownership records and prepares a Preliminary Title Report. The report may identify matters such as:
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Ownership
The person or entity shown in the public records as holding title.
The person or entity shown in the public records as holding title.
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Easements
Recorded rights for access, utilities or other purposes.
Recorded rights for access, utilities or other purposes.
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Liens
Recorded claims that may need to be addressed before closing.
Recorded claims that may need to be addressed before closing.
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CC&Rs and restrictions
Recorded conditions affecting how the property may be used.
Recorded conditions affecting how the property may be used.
Reviewing the report gives the buyer an opportunity to understand recorded matters affecting the property before the transaction closes.
Step 4 — Completing due diligence
During escrow, buyers usually complete the inspections and investigations they believe are appropriate. Depending on the property, this may include access, utilities, zoning, flood information, boundaries, septic or well information and building requirements.
Many of the topics covered throughout Land University are part of this due diligence process.
Step 5 — Removing contingencies
If the purchase agreement contains contingencies, the buyer generally has a stated period to complete the related investigations. Once satisfied, the buyer removes those contingencies according to the terms of the contract.
Contingency rights and deadlines come from the written agreement, so buyers should understand them and ask questions before allowing a deadline to pass.
Step 6 — Closing
When all requirements have been satisfied, the buyer signs the final documents, the seller signs the necessary transfer documents, funds are received and the deed is recorded with the county.
At that point, ownership officially transfers to the buyer.
Ken's Tip
Don't be afraid to ask questions during escrow. Buying land is an important decision, and there are no “silly” questions.
A good escrow officer, title company and real estate professional are there to help you understand each step along the way.
Frequently asked questions
What does an escrow company do?
An escrow company acts as a neutral third party, helping make sure the terms of the purchase agreement are completed before the transaction closes.
Who holds the buyer's money?
In most transactions, the earnest money deposit is held by the escrow company until closing or otherwise handled according to the purchase agreement.
When do I officially own the property?
Ownership generally transfers when the deed is recorded with the county.
Can I ask questions during escrow?
Absolutely. Escrow is designed to help buyers and sellers complete the transaction with confidence. If something isn't clear, ask.
How long does escrow usually take?
That depends on the agreement between the buyer and seller. Some transactions close in a few weeks, while others may take longer because of financing, investigations or other details.
From My Experience
Everything in Land University is based on what I've learned over many years of buying, selling, developing and researching land in Northern California.
My goal is to help you understand the questions to ask and the issues to investigate before buying land. Every property is different, laws change and city and county requirements can vary.
I'm not an attorney, licensed land surveyor, engineer or government official. These lessons are practical education based on my experience, not legal, engineering, surveying or tax advice.
Please verify important information with the appropriate city or county departments and consult an attorney, licensed surveyor, engineer, CPA or other qualified professional when needed.
— Ken Grisham