What is the difference between Title and Escrow?

Most folks who are not in the real estate business who have bought or sold a home have had the experience of going to a title company and signing paperwork. The definition of the terms Title and Escrow may not have been clear as the transaction was going forward, but these are very important in a real estate transaction.

In the most basic of explanations, title work is examining the public record to determine ownership, encumbrances, and anything else that may restrict or modify the use of a piece of property. When a buyer purchases a property, they are buying insurance to cover loss. No one wants to get a knock on the door one morning and meet a long lost relative of the seller who claims to be the rightful owner of your home.

Escrow is a whole other process. At its essence, it is a process where all liens and expenses are accounted for up to the day of closing (transfer of ownership) and the parties in the transaction are credited or debited for those items. The escrow team gathers information on the sellers’ side such as loan pay-off amounts, utility bills, tax payments and HOA fees to handle on behalf of the seller. They also get loan documents, loan origination fees and other expenses to determine the amount of funds that the buyer will need in order to close the sale. They also credit the buyer with any money already places on escrow – such as earnest money delivered very early in the transaction. The escrow closing agent then meets with the parties and carefully explains and has them sign the documents. Once this is accomplished, funds go to the respective parties and the deed is finally recorded.

It’s important to note that title work must be done by a title company on the county where the property is located, However, escrow does not need to be. Escrow needs to be performed by either an attorney or an escrow officer who has a license to perform a very narrow set of legal duties.

If you have more questions or I can help you with your real estate needs, please call or text me at 360.259.4027.

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