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The role of “escrow” in real estate transactions

On Behalf of | Nov 16, 2023 | REAL ESTATE LAW - Real Estate Transactions |

California residents who get involved in real estate transactions oftentimes find that they need to familiarize themselves with certain legal terms in a hurry. “Escrow” is one such term. An escrow arrangement is common in both residential and commercial real estate transactions. In essence, funds are placed in “escrow” – meaning, with a third-party financial caretaker – at a certain point in the timeline of a deal to help ensure that it moves forward.

Importance of escrow

Typically, it is the buyer who deposits funds in escrow. This step shows that the buyer is serious and has some “skin in the game” as the details of the real estate transaction are hashed out. In some cases, there will be contingencies on how the funds are then released or applied to the sale. In certain situations, the funds may even be forfeited to the seller, if the buyer fails to meet certain conditions.

The amount that needs to be placed in escrow will be different for every real estate transaction. Oftentimes, it is a percentage of the total sale price that the parties have agreed to. But, no matter how much it is, it is intended to show that the buyer is serious and has enough funds to complete the transaction.

Real estate transactions in California can get complicated quickly. When the money details start to rise to the top of the list of concerns, both parties can get especially sensitive to how the transaction will play out. If you have concerns about your real estate transaction and how the escrow process is playing out, but sure to get the right legal information for your specific situation.