The escrow process is one of the most important aspects of the home buying process, which is why it is performed by a qualified and professional third party escrow company. The escrow company simply provides a placeholder for earnest money until the actual closing occurs. Unfortunately, there are times when a sale cannot come to completion. In these cases, escrow cancellations are required. Although the process is straightforward, there are some guidelines to keep in mind.
Escrow Companies Are Not Mediators
Since closings that fall through are often due to disagreements, the refunding of escrow funds can be emotionally charged. However, the escrow company does not decide who receives the money or if any fees or reductions are necessary. Instead, they required that both parties submit mutual cancellation instructions. If no instructions are submitted, or if parties disagree, the escrow company allows a court to decide, in a process called Interpleader Action.
As the escrow company has invested time and resources into managing the escrow, they will typically charge a fee if the escrow is canceled. Fees range widely, so verify them up front before you choose a company so that you know what to expect.
For more information about the escrow process in California, please contact Brighton Escrow, located in Hermosa Beach.