Escrow Process

The escrow process is the most common used procedure by which real estate is bought, sold, and refinanced in the state of California. If you are buying or selling a home, a commercial property, building your dream home, or refinancing your property, you will want to make sure your transaction is in the hands of a reliable, experienced, and secure escrow company. To provide you with some answers on the process, below are some common questions and answers to help guide you through the California escrow process.


Escrow is the process whereby parties to a contract, usually a real estate contract, deposit funds with a neutral third party known as an “Escrow Agent” (Hollywood Escrow). As a third-party Escrow Holder, Hollywood Escrow would the hold funds in a trust account with the obligations of a trusted fiduciary. These funds are held in trust until a specific event or condition is met according to specific, mutually written instructions from parties are met. Escrow is essentially a clearing house for the receipt, exchange, and distribution of the items needed to transfer or finance real estate. When the event occurs or the condition is satisfied, a distribution or transfer takes place. When all the elements necessary to consummate the real estate transaction have occurred, and all the funds in the trust account have been disbursed according to the instructions, the escrow is considered “closed.” An essential element of an escrow is the irrevocability of the deposit of both the deed and purchase money.


There are different types of escrow companies in California. An “independent” escrow company is licensed by the California Bureau of Organizations (DBO). This license can only be obtained after the escrow company has met and satisfied all of the licensing requirements set forth by the DBO.

A “controlled” escrow company, which is also known as a non-independent escrow company is not licensed by the DBO. A controlled escrow company can be owned and operated by any of the persons or entities such as a real estate broker or title company. The licensing requirements, laws, and regulations that they are subject to vary widely.


The licensing requirements and regulation of an independent escrow company, such as Hollywood Escrow, are more stringent than the regulations placed on a non-independent escrow company.

An independent escrow company must follow strict daily, monthly, and annual trust accounting procedures for the protection of its clients’ funds and to be in compliance with the requirements of the DBO. The licensing requirements of a non-independent escrow company y is much less intensive.

An independent escrow company must be a member of the Escrow Agent’s Fidelity Corporation (EAFC) if the escrow company will be engaging in escrows specified under section 17312(c) of the Financial Code, including but not limited to bulk sales, real property escrows, escrows involving manufactured homes and mobile homes, and und or joint control escrows. The EAFC indemnifies member escrow companies against loss of trust fund money caused by fraudulent misappropriation by an officer, director, trustee, stockholder, manager, or employee of a member.

Pursuant to the licensing regulations of the DBO, the Escrow Manager of Hollywood Escrow must have at least 5 years of experience handling escrows and escrow funds. All employees must be screened and live scanned by the Department of Justice.


Pursuant to Section 17403.4 of the Financial Code, all written escrow instructions must include the escrow licensee’s name and identify the supervising agency. Hollywood Escrow is an independent escrow company licensed by the Department of Business Oversight under Escrow License No. XXXX.


The selection of the escrow company is made by the parties to a contract, upon mutual agreement. Like all the material terms and conditions of the agreement, both parties must agree on the selection of the escrow company. It is common for a real estate broker to recommend an escrow company, especially if the broker continually does business with the escrow officer or escrow company. However, while a real estate broker may suggest an escrow company, he or she may not designate an escrow holder as condition precedent to a transaction.


In the case of a real estate sale/purchase, escrow is considered “open” when a fully executed purchase contract is delivered to the escrow officer, escrow instructions are fully executed, and the food faith deposit or initial down payment is deposited with the escrow holder.


Escrow is considered “closed” when all of the conditions to the escrow have been satisfied, the loan has funded in the case of a transaction involving new financing, documents have been recorded, and the property and funds have legally changed hands. Full performance, by completion of the escrow, terminates the escrow. At the close of escrow, your escrow officer will provide you with a Final Closing Statement.


The Final Closing Statement is an itemized accounting of the escrow which reflects al of the costs, credits, debits, and prorations to the escrow. The escrow officer will prepare a Final Closing Statement at the close of escrow that reflects all the disbursements made on the escrow. It represents all the financial terms of the escrow transaction. If funds are due at the close of escrow, the Escrow Officer will be responsible for disbursing those funds.


The Escrow Instructions is the contractual agreement between the parties to the escrow (usually the buyer and seller) and the escrow company. It contains all the material terms and conditions of the escrow, the company’s legal responsibilities, and general provisions. Escrow Instructions usually reflect the agreements made between the parties with respect to the escrow and the duties of the escrow officers. Because an escrow holder may only act upon specific written and mutual instructions of the principals, the escrow instructions must be clear in content, accurately reflect the intention of the parties, and the duties of the escrow holder. When fully executed by the parties, the instructions become an enforceable contract.

The escrow officer can only process the escrow in accordance with the escrow instructions. Without signed instructions, the escrow officer cannot proceed. The escrow officer will then only perform functions that they are authorized to do in writing by the mutual agreement of the parties. It is only when all the conditions required in the escrow instructions have been satisfied that the escrow is complete.

It is important to remember that escrow officers are human and mistakes can be made. All parties to the escrow should carefully read the instructions to avoid any mistakes or ambiguities before signing the agreement.

Escrow officers are prohibited from accepting escrow instructions or amendments containing any blanks to be filled in after signing or initialing of the instructions.


An escrow officer is a disinterested, neutral third party whose job is to the process the escrow according to specific instructions, handle the funds and documents from the opening of the escrow to the close of escrow. The escrow officer is responsible for the preparation and processing of a significant amount of paperwork, including escrow instructions, escrow amendments, estimated, and final closing statements. Escrow officers must comply with local, county, state, and federal requirements relative to required documentation and fees.

An escrow officer is the communication link for all of the parties and the central place where buyers, sellers, real estate, and mortgage brokers go for answers. However, it is important to understand that while the escrow officer is a neutral third party, he or she cannot give legal advice, real estate advice, tax advice, or be involved in the negotiation of the contract, or to advise the principals with respect to the same. An escrow agent is not an arbitrator or mediator of disputes.


Closing costs refer to and include a variety of costs incurred by either a buyer or seller in the process of buying or selling property. They are generally determined by the terms and conditions of the contract, the type of transaction, the location of the property, and whether or not there is a loan. For example, in a typical real estate contract, there is a new loan and certain fees in connection with obtaining a new loan, paying off an old loan, escrow fees, title fees, recording fees, transfer taxes, real estate commissions, prepaid property taxes, home warranties, and insurance premiums.


Prorations are items that are properly distributed and divided proportionately between the parties so that the parties are equitably responsible for the amounts owned during their respective ownership of the property. Examples of prorated items are items that have been prepaid by the Seller prior to the close of escrow. In order to equitably reconcile these prepaid items or recurring costs, the escrow officer must prorate these expenses.

Typical prorated items are security deposits, property insurance, property taxes, rental income, and homeowner’s association dues.


The decision of how to take title to property is an important one and must carefully be made when purchasing a property. There are several different title vesting options in California (ex: joint tenancy, tenants in common, community property).

This decision must be carefully considered as there are legal ramifications with each type of vesting. Hollywood Escrow cannot advise you on what selection to make and it is advisable to seek the advice of an attorney for this determination.


A notary registered with the Secretary of State must acknowledge any documents that will be recorded in the public records. In a typical escrow transaction, the following documents must be notarized:

  • Grant Deed
  • Quitclaim Deed
  • Deed of Trust
  • Certificate of Trust
  • Power of Attorney
  • Any document requiring notarization by the lender in a loan packet

In addition to the above, due to the recent rise in wire fraud, Hollywood Escrow requires all wire requests to be notarized.


A preliminary title report is a report issued by the designated title company based on a search of the public records. The report contains conditions that the title company will require prior to the issuing a final title policy. These conditions typically include payment of any existing liens on the on the property, release of any existing judgments, and other items that are required to provide “clear title” to the new owner of the property. The preliminary title report contains exceptions to coverage which should be reviewed carefully by the new buyer



2401 Pacific Coast Hwy
Suite 101
Hermosa Beach CA 90254


(833) 9-ESCROW toll free
(310) 318-3300
(310) 712-8383 fax


Signing Offices:  Hollywood Escrow signing offices provide you a venue to meet with a local representative who will assist you with support and expertise throughout the escrow process.

Mobile Notaries:  With a network of mobile notaries throughout California, Hollywood Escrow is able to facilitate the escrow process by traveling to a location that is most convenient for you. This allows you to complete the necessarily paperwork without having to travel to an actual office, while still receiving the quality service and attention we’ve provided to our clients throughout the years.

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