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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Related Concepts
The closing process, also called settlement, is the final step in a real estate transaction where documents are signed, funds are disbursed, and title is officially transferred from the seller to the buyer.
Constructive notice is the legal presumption that a person has knowledge of information that is available through public records or visible inspection of the property, regardless of whether they actually knew about it.
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
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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 $700,000. The escrow officer calculates that the combined federal FIRPTA withholding (15%) and California state withholding (3 1/3%) totals about $146,667, which exceeds the seller's net equity of $100,000 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?