‘I’m in escrow.’ You hear these words all the time when discussing the sale of a home, but what exactly do they mean? In California, the escrow process is a necessary step before a house or piece of real property can exchange hands.
An escrow is essentially a company who acts as a neutral third party and holds the money involved in the real estate transaction until all escrow conditions are met. When land, houses or other such property is involved, the escrow holds a deposit of money until the legal title to the land can be transferred to the new owners. Further, in California, an escrow also holds the deed to property until the buyer deposits the money needed to complete the purchase.
If a problem during the real estate transaction arises, such as a disagreement over price or terms, the escrow company does not get involved. It informs the buyer and seller’s agents of the problem and waits until the parties mutually agree on how to proceed. If the disagreement cannot be solved in a reasonable time, the escrow may choose to file all documents and money with the court and withdraw from the transaction; a rare but possible course of action.
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