Under California law, where must an escrow company hold client funds deposited during a residential transaction?
Correct Answer
B) In a separate escrow trust account at a bank or savings institution
Under California Financial Code §17414, escrow companies must deposit all client funds into escrow trust accounts held at a bank or savings institution. These accounts must be entirely separate from the company's operating funds and maintained solely for client transactions until proper disbursement per escrow instructions.
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Previous Question
A foreign investor (non-U.S. person) sells a California rental property for $800,000. The property carries a mortgage balance of $600,000. The escrow officer calculates that the combined federal FIRPTA withholding (15%) and California state withholding (3.33%) total approximately $146,400, which exceeds the seller's net equity of $200,000 after paying off the mortgage. What is the most appropriate course of action?
Next Question
During a California residential escrow, the seller submits an amended escrow instruction requesting a new closing date. The buyer has not signed or agreed to the amendment. What is the escrow officer's proper course of action?