| Item | Fact (as of September 2026) |
|---|---|
| Deposit amount | Commonly 1 to 3 percent of the price, credited to the down payment |
| Deposit deadline | Within 3 business days of acceptance (California standard contract default) |
| Who holds it | Only the escrow company's trust account |
| Default contingencies | 17 days each for inspection, appraisal and loan; often shortened |
| Escrow length | 30 to 45 days financed; 7 to 14 days cash |
| Escrow fee | Customarily split between buyer and seller in Southern California |
| Damages cap | Forfeited deposit capped at 3 percent of price on owner-occupied 1 to 4 units |
| Seller withholding | California 3.33 percent of price, waived for principal residences and other exemptions |
People searching for what escrow is or when the deposit is due are usually writing an offer or have just opened escrow. This page answers the deposit and escrow questions in order: the deposit first, then the process, fees and documents, and finally what happens when something goes wrong. Terms follow the California Association of Realtors standard purchase agreement (2024 revision); your signed contract controls if it differs.
In Southern California the earnest money deposit (EMD) is commonly 1 to 3 percent of the price, with 3 percent more usual in a seller's market. The California standard contract defaults to payment within 3 business days of acceptance, by wire or cashier's check straight into the escrow company's trust account. It is not extra money; it is credited toward the down payment at closing. On a 1,000,000 dollar home that is typically 10,000 to 30,000 dollars.
Only the escrow company's trust account; never an agent, the seller or any individual. Licensed California escrow companies are regulated by the state Department of Financial Protection and Innovation, trust funds are kept separate from the company's own money, and nothing moves without instructions signed by both parties. Anyone asking you to wire a deposit to a personal account or pay a "reservation fee" first is a red flag.
Only in one situation: after you have removed all contingencies (inspection, appraisal, loan) in writing and then fail to close. The seller can then keep the deposit under the liquidated damages clause, and California law caps that at 3 percent of the price for owner-occupied 1 to 4 unit homes, with anything above 3 percent returned. Cancelling inside a contingency period, a seller default, or a mutual cancellation all return the deposit.
Cancelling within the inspection, appraisal or loan contingency period under the contract returns the full deposit, and so does a seller default. The refund needs a cancellation and release of deposit signed by both parties; escrow usually returns the funds to the original account within a few business days. If one side refuses to sign without a good-faith reason, California law exposes them to a penalty of up to 1,000 dollars plus damages, so sellers rarely stall.
Not the same thing, but part of the same money. The deposit is good-faith money paid within days of acceptance and held in escrow; the down payment is the total cash you bring at closing. Escrow credits the deposit toward the down payment, so you wire only the remaining balance plus closing costs. With a 200,000 dollar down payment and a 20,000 dollar deposit already in, you wire 180,000 plus costs before closing.
It helps, if you understand the risk. A larger deposit signals funds and commitment, and sellers compare it across offers. A common structure is 3 percent up front plus an increased deposit after contingencies are removed. A bigger deposit does not mean more to lose: inside the contingency periods it is still fully refundable; the exposure begins only after contingencies are removed. We design the deposit together with the contingency timeline rather than raising it in isolation.
Call escrow at a number you already have to verify the wiring instructions before sending, and after the wire escrow issues a deposit receipt; your agent is notified as well. Escrow also confirms receipt to the seller's side, which is a milestone in the contract. If you do not get a confirmation, ask; do not wait.
Escrow is a neutral third party that holds the money and the documents for both sides and releases them only when every instruction both parties signed has been met. In a US purchase the money never goes straight to the seller and title never passes hand to hand: escrow receives the deposit and the balance, coordinates the title company, the lender and the county recorder, calculates each side's costs, records the deed and only then pays the seller. The system exists so two strangers can transact safely.
It is negotiated in the offer; either side can propose and the choice is written into the contract. In Southern California the listing side often proposes and the buyer accepts or counters, but neither party can force the other to use a particular company. Escrow must be neutral, with no financial tie to either agent. We look at the company's license, its ability to handle Chinese-language documents and its response time before accepting or proposing an alternative.
Financed purchases usually run 30 to 45 days and cash 7 to 14, with the number of days set in the contract. Common delays: loan document follow-ups, appraisal scheduling, repair negotiations after inspection, late HOA documents, seller title issues (liens, probate, divorce), and for overseas buyers the time needed for international wires and notarization. We calendar every deadline in the first week of escrow and chase each one two days ahead.
Seven things: pay the deposit within 3 business days; complete escrow's buyer information form and the title company's Statement of Information; schedule the inspection and termite report; submit the formal loan application and lock the rate; start homeowners insurance quotes; review each seller disclosure as it arrives; and confirm the expiration date of every contingency. A complete first week prevents most later problems.
The California standard contract defaults to 17 days each for inspection, appraisal and loan contingencies, counted in calendar days from acceptance, and they can be shortened in the offer. Removing a contingency requires a signed Contingency Removal; until you sign, it stays in place. A seller who wants to move faster can serve a two-day Notice to Perform, after which they may cancel if you have not removed the contingency. Deadlines are strict; one day changes the outcome.
California requires the seller to deliver, within the contract deadline (7 days by default): the Transfer Disclosure Statement, the Seller Property Questionnaire, the Natural Hazard Disclosure report, lead-based paint disclosure for pre-1978 homes, and for HOA properties the rules, financials and meeting minutes. The title company issues a preliminary title report. After each disclosure is delivered, the buyer has the contract's set number of days to cancel based on it.
Closing is a sequence rather than a single day: 3 to 7 days before closing you sign the loan and closing documents before a notary; then you wire the balance; the lender funds; escrow sends the deed to the county recorder, and title transfers to you the moment it is recorded, usually confirmed the morning of the business day after funding. Keys change hands per the contract, most often the afternoon of recording, unless a seller rent-back was agreed.
After signing, escrow gives you a final settlement statement with the exact amount, usually wired one or two business days before closing. Three safety rules: call escrow at a number you already had to verify the account; treat any "updated" wiring instructions as fraud; and never confirm account details by email on the day of a large wire. International wires need a few extra days because intermediary banks add time.
After the deed is recorded, escrow wires the seller the net proceeds, after loan payoffs, commissions, fees and any withholding, the same day or the next business day. The seller is paid on recording day, not signing day. California withholds 3.33 percent of the price from sellers unless exempt, and foreign sellers face the additional 15 percent federal FIRPTA withholding; both come out at this step.
Escrow fees are calculated on the price plus a flat processing fee, differing by company, and you receive a fee sheet before signing. In Southern California the custom is for buyer and seller to each pay half of the escrow fee plus their own side's costs (the buyer's loan-related fees, the seller's commission and transfer tax). All of it is negotiable in the contract, for example a seller credit toward the buyer's closing costs.
Escrow handles money and documents; the title company searches title, issues the preliminary report and underwrites title insurance. There are two policies: the lender's policy, paid by the buyer, and the owner's policy, which by custom the seller pays in Los Angeles County and the buyer pays in Orange County, with other counties following their own customs; all negotiable in the contract. The owner's policy is a one-time premium that protects you for as long as you own the home.
Usually 2 to 3 percent of the price: lender fees and the appraisal, the lender's title policy, half of the escrow fee, county recording fees, prorated property tax and HOA dues, prepaid homeowners insurance, any lender-required tax and insurance reserves, and HOA transfer and document fees. Cash buyers skip the loan-related items and pay around 1 percent. Escrow's settlement statement before signing itemizes every line.
They are split at the closing date: the seller pays through the day before closing and the buyer from closing on. California property tax runs on a July to June fiscal year in two installments, and escrow calculates each side's days. A few months after closing the county reassesses the home at your purchase price and mails a supplemental tax bill covering the difference between the old and new assessed values from closing to the end of the fiscal year, a bill many buyers do not expect.
It is a confidential form the title company uses to verify identity: full name, former names, date of birth, Social Security or passport number, addresses for the last ten years and marital status. Its purpose is to rule out debts, judgments and liens belonging to other people with the same name so they are not attached to your title. A complete form speeds up the title report, and it goes only to the title company, never public.
A grant deed is the standard deed for a California sale: the seller warrants that they have not conveyed the property to anyone else and that there are no undisclosed encumbrances, and it works together with title insurance; a purchase should close with a grant deed. A quitclaim deed simply releases whatever interest the signer has, with no warranty, and is typically used between spouses or within a family. A seller who will only give a quitclaim deed deserves a question about why.
The Preliminary Change of Ownership Report goes to the county assessor with the deed, stating the parties, the price and whether you will occupy the home; the assessor uses it to reassess property tax. Recording without it triggers an extra fee and the county mails the form later anyway. Escrow prepares it for your signature; just check that the information is correct.
Criminals compromise an agent's or escrow's email, wait until the balance is about to be wired, and send "updated" instructions from a nearly identical address; once sent, the money is almost impossible to recover. A legitimate escrow company does not change its account mid-transaction; wiring instructions are given once, in writing, when escrow opens. The rule: verify by phone at a known number before wiring, call about any change, and never use a phone number from the email itself.
A seller who backs out without cause after signing can be compelled to perform (a lawsuit to force the sale) or held liable for damages, though most cases go to the mediation the contract requires first. For a buyer it depends on timing: cancelling inside the contingency periods returns the deposit in full; cancelling after all contingencies are removed forfeits the deposit up to the 3 percent cap. That is why every contingency removal should be signed only after loan, appraisal and inspection are settled.
If the loan contingency is still in place, you can cancel and recover the deposit, or ask for an extension and, with the seller's agreement, move the closing date. If you have already removed the loan contingency, a denied loan means covering the gap with cash or risking the deposit. A pre-approval is not final approval, so we never advise removing the loan contingency before final underwriting is complete unless you can close with cash.
Three options: renegotiate the price with the seller, cover the gap in cash, or cancel within the appraisal contingency and recover the deposit. The lender lends against the lower of the appraised value and the contract price, so the gap can only come from you. A buyer who waives the appraisal contingency in a bidding war has committed in advance to covering that gap, so know the number before writing the offer.
As the contract says: possession at closing by default, or a seller rent-back of days to weeks with the daily rent, the deposit and the final move-out date written in. During a rent-back the home is already yours, so insurance and risk allocation must be spelled out in the agreement. Rent-backs longer than 30 days generally use a separate lease.
No. The purchase escrow is the closing company and it closes when the transaction ends; the escrow or impound account on a mortgage statement is a lender-held account that collects property tax and homeowners insurance with each monthly payment and pays them when due. Loans with less than 20 percent down usually require it; with more down you can often opt out and pay the bills yourself. Same word, entirely different things.
Four things: the recorded deed mailed by the county (within a few weeks); escrow's final settlement statement, which you will need for taxes and for calculating your cost basis when you sell, so keep it; the owner's title insurance policy; and a few months later the county's supplemental property tax bill. After that, the regular property tax bill arrives each October, payable in November and February installments, paid by the lender if you have an impound account.
Most documents can be signed electronically; the deed, loan documents and other notarized items can be notarized at a US embassy or consulate, or notarized locally and apostilled (China has been part of the Hague Apostille Convention since November 2023), or signed by a trusted person under a power of attorney executed in advance. Time zones and courier time must be built into the escrow period, so we usually schedule signing 7 to 10 days before closing.
Shirley Tang Team · 888 Realty · DRE #01845722
19811 Colima Rd. #230, Walnut, CA 91789 · (626) 202-9573 · shirleytangrealtor@gmail.com
Want to check something specific? Contact us in English or Chinese, even if you end up working with someone else.
General information, not legal, tax or lending advice. Confirm your situation with a licensed professional. "As of" dates show when facts were checked.