Question 1

What is the legal definition of escrow in California?

Accepted Answer

Escrow is a neutral depository arrangement where a third party holds funds, documents, and instructions from both buyer and seller until all conditions of a transaction are fulfilled.

Question 2

Which California law governs escrow companies that are not banks, savings associations, or brokers?

Accepted Answer

The Escrow Law, administered by the California Department of Financial Protection and Innovation (DFPI), governs independent escrow companies.

Question 3

Under what condition may a California real estate broker legally operate as an escrow company?

Accepted Answer

A broker may act as escrow only in transactions where the broker is also representing one of the principals (buyer or seller) in the transaction.

Question 4

What does it mean for escrow to 'close'?

Accepted Answer

Escrow closes when all conditions and instructions from both parties have been met, funds are disbursed, and the deed is recorded transferring title to the buyer.

Question 5

What is a 'closing statement' (or settlement statement) in an escrow transaction?

Accepted Answer

A closing statement is a detailed accounting document that itemizes all credits, debits, costs, and prorations for both buyer and seller at the close of escrow.

Escrow & Title: California Real Estate Salesperson Exam

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