Try 5 free practice questions with instant feedback. See how ready you are.
Question 1
What is the legal definition of escrow in California?
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?
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?
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'?
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?
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.