I have a buyer in escrow on a Valencia town home & due to his recent divorce, alimony & child support, despite high income & FICO’s, he could not secure a conventional loan within our loan contingency period so we had to send a cancellation of contract & back out within our time frames. The listing agent & escrow are both out of area, in Temple City.

They are charging my client a $250 cancellation fee to cancel the escrow. Is that something that is customary and/or normal? Not sure what to think or if this is normal and/or acceptable.


The terms of the purchase agreement do give the escrow holder the right to charge a fee when a file cancels.  In our market place, it is not that common.  Cancelling escrows are one of those “costs of doing business”, in most circumstances.

I may charge a cancellation fee once or twice a YEAR, and only when the circumstances are really extreme (like an escrow cancelling in the final days after tons of work was done, or some other circumstance that caused out of the ordinary costs or expenses to the escrow company).  We do make an attempt where it is appropriate to recoup our out of pocket expenses to third parties.

When you are dealing with an out of area escrow office, it’s hard to know if it may be more common to charge a cancellation fee in their particular market place.

The bottom line is that $250.00 doesn’t sound crazy or out of line, and without knowing all the details, it is hard to say if I would or would not have charged anything, I just rarely do.

When discussing cancellation I always like to point out that when either party requests cancellation, funds on deposit can only be released from escrow upon one of the following (which is defined in Item 14 F of the CAR Residential Property Report, under “EFFECT OF CANCELLATION ON DEPOSITS”).

1)     Mutual Instructions (such as the CAR Cancellation of Contract, or Escrow Cancellation instructions, signed by both buyer and seller)

2)     Judicial Decision (that means a Court Order)

3)     Arbitration Award

In the absence of one of these, funds are held in escrow, until ultimately the escrow company can Interplead (turn them over to a court) or Escheat (turn them over to the State of California) the funds.

Cynthia Moller