Title and Escrow: How It Works, Fees, and Timeline
The short answer
- A title search confirms the seller has clear ownership and reveals any claims or liens
- Owner's title insurance protects your ownership — in California the purchase agreement normally provides for it
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Why this matters
Between your accepted offer and closing day, a quiet but critical process happens behind the scenes: the title company verifies that the seller can deliver clear title, and a neutral escrow holder keeps your funds and documents until everything checks out. Understanding this process prevents surprises on your Closing Disclosure.
What Is a Title Search?
A title search examines public records to confirm the seller has legal ownership and the right to sell the property. It also uncovers any claims against the property — unpaid taxes, contractor liens, HOA (homeowners association) liens, easements, or unresolved legal disputes. Liens such as the seller's mortgage are paid off at closing, and other problems must be cleared before the sale can close. In some states a real estate attorney handles this; in California, a title company does the search and issues a preliminary title report early in escrow. Ask your agent about any exception you do not understand.
Title Insurance Explained
Title insurance protects you if a problem with the title surfaces after closing — a forged deed in the chain of ownership, an unknown heir with a claim, or a lien that was missed during the search. There are two types: lender's title insurance, which your mortgage company requires and you usually pay for, and owner's title insurance, which protects your ownership interest. In California the standard purchase agreement normally provides for an owner's policy, and local custom often decides who pays for it. Title insurance is a one-time premium paid at closing. Premiums depend on the price, the insurer, and the policy type, and your Loan Estimate shows the expected amounts.
What an Owner's Policy Does for You
A title search catches most problems, but not all of them — a forged signature in the chain of ownership, an heir no one knew about, or a boundary dispute can surface years later. If a covered claim comes up, the title insurer handles your legal defense and pays covered losses up to the policy amount. The lender's policy does none of this for you; it protects only the lender's loan. Your owner's policy is a one-time premium paid at closing, and its protection lasts as long as you own the home. Without it, you would defend a title claim on your own.
How Escrow Works
Escrow is a neutral third party that holds money and documents during the transaction. California is an escrow state: an escrow company or a title company's escrow department runs the closing, usually with no attorney at a table. Your earnest money deposit, often around 3% of the price in California, goes into escrow — not to the seller. The escrow officer makes sure all conditions are met before releasing funds. You typically sign loan documents a few days before closing, wire your remaining funds, and the home is yours once the deed records with the county. Before you wire anything, call your escrow officer at a number you already know to confirm the instructions — wire fraud targets buyers.
Fees to Expect
Title and escrow fees are part of your closing costs: expect charges for the title search and report, lender's title insurance, owner's title insurance, escrow or settlement services, and recording. Amounts vary by price, county, and company, so compare the figures on your Loan Estimate, and remember you can often shop for title and settlement services. In California, who pays for the owner's policy and the escrow fee follows local custom and varies by county, and it is negotiable. The county documentary transfer tax ($1.10 per $1,000 of price) is customarily paid by the seller in many counties, and some cities add their own transfer tax. All of these fees are itemized on your Closing Disclosure, which you must receive at least three business days before you sign your loan documents.
Everything to remember
- A title search confirms the seller has clear ownership and reveals any claims or liens
- Owner's title insurance protects your ownership — in California the purchase agreement normally provides for it
- Escrow acts as a neutral party holding funds until all conditions are met — in California, escrow runs the whole closing
- Title and escrow costs vary by county and price — check your Loan Estimate, and confirm wire instructions by phone before you send money
- An owner's policy is a one-time premium that protects you for as long as you own the home
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