otherwise negotiated).
Important legal points: • Earnest money does not automatically belong to the seller • If the buyer cancels the contract within contingency periods, the deposit is generally refundable • Once contingencies are removed, the deposit may be at risk if the buyer fails to perform • At closing, the earnest money is credited toward the buyer’s costs, such as the down payment and closing expenses—it is not an extra fee. In California, it is customary—but not legally required—for buyers to deposit around 3% of the purchase price as earnest money. The exact amount is negotiable and must be clearly stated in the purchase agreement.
WHAT IS ESCROW?
Escrow is a neutral, third-party process designed to protect both buyer and seller during a real estate transaction. A licensed escrow company holds funds and documents while ensuring that all contractual conditions are met before ownership transfers.
The escrow officer is a neutral professional who: • Holds buyer funds securely • Follows the terms of the purchase contract
• Coordinates with lenders, agents, and title companies • Ensures funds and title transfer correctly and legally They do not represent either party and do not provide legal advice—they strictly follow purchase agreement's written instructions and any additional addendums.
THE ESCROW PERIOD
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