Home Buying in California>Question Details

Haedus, Home Buyer in 93001

Is it industry standard for buyer to pay a cancellation fee to escrow (“for work completed to date”) in the event of a sale cancellation?

Asked by Haedus, 93001 Sun Jan 8, 2012

I recently made an offer on a property and made a deposit. The escrow instructions I subsequently received contained the following clauses:
“Cancellation: In the event this escrow cancels after the time specified... Escrow Holder is entitled to a $750 escrow fee for work completed to date. Said escrow fee shall be automatically deducted from the Buyer's deposit at time of cancellation.
In the event that escrow cancels after Escrow Holder's receipt of Buyer's loan documents, Escrow Holder is entitled to entire escrow fee for work completed to date. Said escrow fee shall be deducted from the Buyer's deposit at the time of cancellation.”
Is such an escrow condition industry standard? If, in fact, escrow can claim any escrow fee in the event of a cancellation, does it not violate escrow's duty to be impartial to place the entire burden on the buyer? Will our sales contract become invalid if we cannot agree on the escrow provisions?

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BEST ANSWER
Haedus- This amount is certainly excessive. Although- unlike folks in my profession- if it does not close we do not receive compensation. They performed in all probability several functions which had a cost attached beside their individual labor.

This link is from my major escrow & title provider. Their "closed fees" are less than what you escrow is requesting as a "Termination Fee." Print this out if they are local and show them how out-of-line they are. otherwise as an Attachment to an email. http://www.firstamericantitle.com/fee_schedules - Good luck- Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Tue Jan 10, 2012
Yes, typically since the buyer is the only one with funds on deposit, the cancellation fee is paid out of their EMD. It does not violate any escrow duty of impartiality since it is clearly stated in instructions that must be mutually signed. You can ask to amend such instructions, but they are not bound to do so.

Thanks!
Sinead mcAllister
858-205-5215
brokermcallister@gmail.com
0 votes Thank Flag Link Mon Jan 9, 2012
I agree, it is important to check with regulations and also, make sure that you understand the conditions of an offer. If you feel that this is not something that you really want to buy, go to the next property and see if it is a better fit.

All the best to you.

Kathy Hines
0 votes Thank Flag Link Sun Jan 8, 2012
Hi Haedus,

We do not see the title companies do that too frequently in our market, but there may be a provision for that spelled out in your state's regulations. I would consult your Realtor, as they will have the most accurate information for what is common place in your location.

Mark Meissner
ERA Landmark
Bozeman, Montana
0 votes Thank Flag Link Sun Jan 8, 2012
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