What If My Escrow Is Cancelled?
The purchase of your new home did not go the way that you planned. Escrow was opened and your earnest money check was deposited with the escrow company. The inspection did not go well and now you want to cancel the purchase and sale agreement and find another home to buy. What happens to the escrow that was set up?
Escrow is not opened with the idea that it will cancel. There are occasions, like the one just described, when the parties disagree during the pendency (term) of the escrow. Some escrow holders provide for just such an event by written instructions in the General Provisions.
An escrow holder will take the position that no funds can be refunded until the escrow holder is in receipt of mutual cancellation instructions signed by all the principals in the transaction. The escrow holder cannot make a determination as to who is the right party in a dispute on a cancellation. They will not return funds or documents until the principals agree what is to be done. The escrow holder is not a judge nor a lawyer and will make no determination as to which party is entitled to any and all funds.
Expect to be charged a fee for the cancellation. This is a charge for professional services rendered and quite often for several out-of-pocket expenses which have been incurred on the clients’ behalf.
Sometimes it may be necessary for a dispute to be settled in a court of law. The court will make the determination as to which party is entitled to any monies and documents. This is called an interpleader action. Most disputes are resolved before the interpleader is filed. The costs for such action is extreme and may be more than the disputed amount. The costs for the interpleader action are normally paid out of the funds on deposit in the escrow.