What Is An Escrow Company?

What Is An Escrow Company?

An escrow company is a neutral third party in a real estate transaction whose primary role is to protect the interests of all parties involved in the sale.

When it comes to a real estate transaction, most people think of these four parties:

  • Buyer
  • Seller
  • Buyer’s agent
  • Seller’s agent

You can add one more to that list.

The escrow company.

They’re the neutral party between the buyer and the seller during the process.

What does an escrow company do?

At a high level, an escrow company is responsible for three things:

  1. Handling the funds between the buyer and seller.
  2. Making sure that the buyer doesn’t receive the deed to the property until the conditions in the purchase contract are met.
  3. Ensuring the seller doesn’t receive any funds until those same conditions are met and the transaction is closed.

As the seller and buyer negotiate the contract and sign disclosures, the escrow company holds the funds and documents.

What is an escrow officer?

An escrow officer, also known as an escrow agent, is a representative at the escrow company who is assigned to the transaction.

Their role is to only provide escrow services, while not giving any kind of advice to either party.

They can objectively discuss the instructions for the closing to take place, but they must remain completely neutral.

It’s the escrow officer’s job to make sure all of the T’s are crossed and all of the I’s are dotted.

Is a title company and escrow company the same?

In short, no, an escrow company is not the same as a title company.

A title company handles the transfer of the sale from a legal perspective.

They do this by ensuring that all rights and interests of a property are in line to proceed with the transfer.

They also provide title insurance to both parties.

In some parts of the country, the escrow company will be a part of the same company as the title company (e.g. Northern California).

And in other areas, they are two separate services (Southern California).

Who opens escrow?

The real estate agent will usually open escrow, but technically, it’s the buyer’s or seller’s choice.

Whether it’s the buyer, seller, or agent, it depends on the region.

For example, in California, it’s very common for escrow to be opened by the seller’s agent before the home is even on the market.

In other parts of the country, it’s common for escrow to be opened by the buyer’s agent after the contract has been ratified.

Conclusion

Whether you’re selling your house or buying, an escrow company will be a party involved in your real estate transaction.

Knowing what role they’ll play and how they’re involved will help make things clearer as you navigate toward completing your sale.

Joseph Alongi

Joseph drives the strategic vision and works closely in all facets of our business as we continue to grow and build the SoldNest platform. He holds a real estate broker's license in California and has over seventeen years of industry experience. He's dedicated to making the entire real estate experience easier, faster, and more profitable for everyone.