Purchasing Real Property? Get the FAQs and Answers on Escrow

The sale and purchase of real properties are significant financial transactions that warrant extra precautions. Escrow services and real estate laws can be complex, which is one reason why sellers and purchasers should seek the services of a seasoned lawyer before signing any documents or exchanging funds.

What’s the legal definition of escrow?

The California Financial Code defines escrow as the process by which one person transfers a written instrument, funds, or evidence of title to a third party to be held until a specified event has occurred. At that time, the third party is responsible for transferring the funds or document to the specified party. In other words, escrow is a way of protecting something of value while a transaction is being negotiated and conducted. Escrow minimizes risk for all parties involved.

What is broker-controlled escrow?

Broker-controlled or broker-run escrow refers to an escrow conducted by a real estate broker who is also performing any other services for that transaction that require a real estate license. For example, Jaime the realtor is representing Acme Corp. in the purchase of commercial real property. Jaime also performs escrow services for that transaction, as permitted by the exemption of the Escrow Law. Jaime will hold Acme Corp.’s funds in escrow until all necessary documents have been signed, and then transfer the funds to the real property seller. If Jaime were to provide escrow services for a transaction, and he also did not provide real estate services for that transaction, only then would he be in violation of the law.

What are escrow instructions?

The escrow officer prepares escrow instructions to specify all of the terms and conditions that apply to that transaction. In addition to the basic information about the transaction, the escrow instructions typically specify the duties of the escrow officer and the agreements made between parties.

The Law Offices of Jon Webster provides trusted legal services in Concord, CA to all entities involved with real property transactions. We work closely with our clients to develop effective solutions to real property law challenges. Call (925) 609-7600.

Categories: Property Management

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