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Frequently Asked Questions


Q. Which party selects the escrow company?

A. The buyer or the buyer's real estate agent usually states their preference for an escrow company in the purchase agreement when they submit the offer to the seller or seller's real estate agent. The seller can agree to the buyer's selection or counter with another choice. It is customary for the listing or seller's side of the transaction to have the choice of most services in the transaction including the escrow company.

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Q. Does the buyer or seller pay the cost of escrow?

A. Nearly all closing costs, including the costs of escrow services, are negotiable. In Southern California the buyer and seller customarily split the cost of escrow services. The seller typically pays for the owner's title policy and the real estate agent commissions, as well as the documentary transfer tax. (The tax can range from $1.10 per thousand to more than $8 per thousand, depending on where in California the property is located.)

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Q. Can the escrow officer solve disputes between the parties?

A. California law prohibits an escrow officer from favoring the lender, the buyer, or the seller. An escrow officer's power is strictly limited to following the escrow instructions agreed to at the time of purchase and written modifications to those instructions signed by both parties. The escrow officer does not have the power to referee dispute's between the parties. In the event of a dispute the parties can not resolve themselves, the escrow officer would stop processing the escrow until the parties agreed or a court order was received.

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Q. What factors should be considered when choosing an escrow company?

A. Escrow is a relationship business. Your broker will typically recommend an escrow officer whom he or she has successfully worked with in the past. Important factors to consider are the level of experience of the individual who will be acting as the escrow officer, the financial strength and stability of the company and the price charged for escrow services. It would also be wise to inquire whether or not the escrow officer will be available throughout the escrow period. Another wise choice would be to choose an independent escrow company.

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Q. If the buyer and seller are unhappy with the service being provided can they switch companies in the middle of escrow?

A. Yes. The catch is that both the buyer and seller must agree on two things: First, that the escrow company should be terminated, and second, they must agree on the new escrow company. When the buyer and seller satisfy these prerequisites they must notify the original escrow officer of the change in writing and instruct the original officer to transfer the deposit and relevant documents to the new company. The new escrow company will probably recure new escrow instructions and execution of deeds. The old Escrow Officer will not usually release these documents from her file.

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Q. If escrow doesn't close, is the buyer entitled to have his or her deposit returned?

A. According to California Civil Code section 1057.3, it is "the obligation of a buyer and seller who enter into a contract to purchase and sell real property to ensure that all funds deposited into an escrow account are returned to the person who deposited the funds or who is otherwise entitled to the funds under the contract, if the purchase of the property is not completed by the date set forth in the contract for close of escrow or any [extension]." If a buyer or seller fails to sign off on a document that would release the escrow funds within 30 days and there is no real dispute over these funds, then the party who fails to sign the release may be liable for three times the amount wrongfully held (not less than $100 an not more than $1,000) and attorney's fees. If one party sues the other to receive the funds, the escrow holder must deposit the sum in dispute with the court, or follow the instructions of the court order.

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Q. How is the length of escrow determined?

A. The realty agent will typically negotiate a closing date based on the time that it takes for a lending institution to process a loan, and for the contingencies agreed too in the purchase agreement to be satisfied. Unless the deal is all cash, a minimum of 30 day is generally needed for the loan to fund and for the necessary inspections to be completed.

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