Legal Question in Real Estate Law in California

is it legally considered a ''double escrow/close'' if i use my own funds up front?

as i understand it, a double escrow/close is generally defined as two transactions taking place back-to-back, on the same day, where the end-buyer's funds will be used to fund & close both transactions. however, hypothetically, if i were to, instead, bring my own funds to the table to fund and close the first transaction, is it still legally considered a double escrow? the way i see it, it wouldn't be because, by providing my own funds up front to complete the first transaction, it eliminates the contingency. that's just my logic but, i'd much rather hear it from the professionals! =] thank you, kindly.


Asked on 8/01/08, 6:08 pm

1 Answer from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: is it legally considered a ''double escrow/close'' if i use my own funds up front?

I believe the term "double escrow" is broader than you describe in your proposed definition. In my experience, the term "double escrow," which is a popular rather than a technical legal term, can refer to any two escrows that are interdependent, where both must close to achieve the intended result, but which need to be sequential rather than simultaneous. A recent example from my experience was where X received probate court approval to buy a five-parcel ranch from an estate, but really only wanted part of it himself; Y and Z wanted one parcel each, Y wanted the water rights and Z needed an easement. All this was agreed to after court approval for the sale to X. The sale was made to X in the first escrow, and X conveyed to Y and Z what they wanted in the second.

In the example given, I think it is immaterial whether money from Y and Z was used in part to close the first escrow, or was only deposited into the second. In fact, the latter would make more sense from a simplicity standpoint, but the former might be necessary in a majority of cases in order to have the funds to close the first transaction.

I'm not sure what you mean by "eliminating the contingency." Closing either end of a double escrow should not happen unless and until both are ready to close, "bam, bam," with all contingencies eliminated before either can close.

Finally, I note that double escrows have become associated with "flipping" transactions, and have acquired a bad name in that context because of the frequency of fraud and non-disclosure. Please note that double escrows have been used for decades in all manner of perfectly legitimate transactions, and to be completely forthright they have also been used to acquire oil and mineral rights where the purpose was to use a straw man so as not to disclose that the real buyer was the Standard Oil Trust or whatever, and similar scams.

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Answered on 8/01/08, 8:36 pm


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