California is an escrow state but escrow procedures differ between Northern and Southern California and from county to county. For the purposes of this post I will address the reason you do not need an attorney for real estate transactions in Southern California.
What is Escrow?
Escrow is a neutral party which provides protection to both the buyer and seller during the real estate transaction. Examples of the function of escrow are:
- Receives and holds the good faith deposit from buyer to seller
- Interprets the purchase contract and sets the timelines
- Orders required reports, including preliminary title, natural hazard, city report (if applicable), and others
- Prepares the grand deed, prorates the taxes in insurance per escrow instructions, requests issuance of title insurance and recording
- Prepares final accounting statement for both parties and disburses funds at the end of the transaction
- Escrow is closed when all instructions have been carried out
What is Title?
When a property is purchased ownership cannot be transferred unless it is free and clear from all liens, encumbrances and defects. The title company does its due diligence to ensure that this is the case. Title insurance, which in Southern California is typically paid for by the seller, insures that the buyer will be reimbursed for any losses that might occur should a previously undiscovered defect arise. The buyer is covered as long as he or she owns the home. If a buyer is getting a loan he or she will be required to purchase title insurance to cover the lender. This would also be the case if the property is refinanced.
At the end of the escrow process the buyer’s funds are deposited through title who go down to the County Recorder’s Office and record the new ownership.
And in addition to escrow and title your real estate agent will be working with you every step of the way to ensure everything is on track.
There is no function for an attorney in Southern California real estate transactions.
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I love reading how real estate is done in your area–it’s so vastly different than in mine! That’s why the consumer is SO lucky to have you to represent them in this very important Los Angeles real estate transaction!