How title and escrow work in a California home purchase
Two separate functions that usually sit in one company. Knowing which is which tells you who to call when something goes wrong.
California purchases run through escrow rather than a solicitor, and title insurance is standard. The two functions are distinct even though one company often performs both.
Escrow
Escrow is a neutral third party holding funds and documents until every condition is met, then executing the exchange simultaneously. It does not represent either side and does not give advice.
That neutrality is the point, and also the limitation. Escrow will not tell you a deal is bad. It will tell you whether the conditions written into the instructions have been satisfied.
Title insurance
Title insurance protects against defects in ownership that existed before you bought — an undisclosed lien, a forged signature in the chain, an unrecorded easement, a boundary problem.
It is unusual among insurance products in that it looks backwards. The premium is paid once, and the cover concerns the past rather than future events.
The preliminary report
Early in escrow you receive a preliminary report listing what the title company found: existing liens, easements, covenants, assessments and exceptions to coverage.
This is the document to read. Easements determine what you can build. Covenants may restrict use. Exceptions tell you precisely what the policy will not cover, which is often more informative than what it will.
“If something in the preliminary report is unclear, ask before removing your contingency, not after closing.”
Practical points
- Confirm you are buying an owner's policy, and check whether it is standard or extended coverage.
- Read the exceptions schedule, not just the summary page.
- Verify wire instructions by phone using a number you already had. Escrow wire fraud is common and unrecoverable.
- Ask who is paying for what; customary splits vary by county and are negotiable.
