Once we have a ratified contract, both the buyer and seller have signed off on all terms & conditions, escrow is opened. In Northern California, escrow and title insurance are handle by the same company. These two roles break down as follows:

  1. Escrow: The role of escrow is to act as an independent third party between the seller, the seller's agent, the buyer, the buyer's agent, and the lender. Escrow receives, holds, and releases all cash related to the transaction. By law Escrow only performs duties when it has matching instructions from both the buyer & the seller.
  2. Title Insurance: Once escrow is opened, the title/escrow company will issue a Preliminary Title Report which contains all publicly recorded information regarding the physical description of the property, the current owner and type of ownership, and any encumbrances, encroachments, or easements of record. Before the close of escrow the title company clears the financial liens of the seller. The escrow/title company will issue a title insurance policy which insures clear title. Lenders require an additional supplemental title insurance policy.

Buyer's Due Diligence & Typical Contingencies:

  1. Financing: If the buyer had a financing contingency, the buyer must secure a loan within a specified period of time and at a specified interest rate.
  2. Appraisal: The purchase can be contingent on the property appraising (by an independent appraiser) at no less than the purchase price. In recent years this has been a major issue with securing financing due to the loss of equity during the recent downturn in housing.
  3. Structural Pest Control Inspection: The purpose of this contingency is to gather more information about the physical condition of the property. With a pest inspection contingency, typically the buyer pays for an inspection. Based on the report findings, the buyer can negotiate with the seller for a credit or request to have the work completed if there is physical deficiencies. The seller, however, is not obligated to negotiate.
  4. General Inspection: Conducted by contractors, engineers, architects or other professionals.The purpose of this contingency is to gain more information about the physical condition of the property. Under this contingency, the buyer can have anyone inspect the property. Based on the reports, the buyer can negotiate with the seller for a credit or to have the work completed.The seller, however, is not obligated to negotiate.

Each contingency must be removed based upon the terms of the purchase contract, or the escrow may be in jeopary.The buyer can remove a contingency "subject to" certain new terms being met by the seller, but that becomes a new negotiating point to which the seller must agree. If the seller does not agree, the contract and escrow are in jeopardy and could fail. Once all contingencies have been lifted, the buyer typically increases the earnest money deposit, usually to 3% of the purchase price.

Close of Escrow

  • A few days prior to the close of escrow, the buyers go to the title company to finalize instructions and to sign documents.
  • The buyer reviews the closing statement and makes arrangements to transfer funds required to close escrow.
  • Once the buyers' and sellers' escrow instructions are completed and identical, and all of the funds have been received, a representative from the title company records the deed at the County Recorder's Office.
  • Buyer or seller need not be physically present.
  • Once the deed has been recorded, the escrow/title company disburses funds per the escrow instructions. Both the buyer's agent & seller's agent will be informed, and a key exchange will be arranged through the buyer's agent.


Contact Information

Photo of Ken J. Gendemann Real Estate
Ken J. Gendemann
Pacific Union International
1699 Van Ness Avenue
San Francisco CA 94109
Cell: (415) 828-4063

Ken J. Gendemann, CPA
Pacific Union & Christie's International Real Estate
1699 Van Ness Avenue, San Francisco, CA 94109

Cell: 415-828-4063, Office: 415-345-3083
 License #: 01884446