If you’re buying a home for the first time (or even the second or third time), then you may be a little confused about who does what exactly. For example – what does an escrow agent or escrow company do, and why do you need them? Let’s take a closer look at this important part of the closing process.
What is an escrow agent?
First of all, let’s take moment to clarify what an escrow agent (sometimes known as a title agent) actually is. When you’re dealing with a large financial transaction such as buying a house, the buyer and the seller will enlist the help of a third party to hold on to paperwork, money, and other assets until the process is finalized. This neutral third party is known as an escrow agent. Escrow agents help to keep these assets safe until all aspects of the agreement have been met. They have a fiduciary responsibility to both the buyer and the seller during the closing process.
How is escrow opened?
Depending on your particular situation, either the real estate agent or the lender will open escrow. Once the sales agreement is executed, the buyer’s agent places the earnest money deposit in escrow. The escrow agent may require that you provide personal information at this time, such as your social security number and birthday. They will also request information about how you would like to hold title. This means providing the details about how you want your name listed on all the documents that will be prepared.
What are an escrow agent’s duties?
The escrow agent plays a vital role during any real estate transaction. Their duties include:
- Serving as a neutral third party between all the other parties involved in a real estate transaction.
- Performing a preliminary title search in order to ascertain who currently holds title to a property and the title’s status.
- Requesting a statement from the seller that includes all of the debt and other obligations that will be taken by the buyer.
- Making sure that all the lender’s requirements are met.
- Ensuring that all contingencies stated in the sales agreement are met.
- Preparing documents related to the escrow, such as the deed.
- Receiving money from the buyer and funds from the lender.
- Closing the escrow as detailed by the buyer, seller, and lender.
- Recording the deed and other documents related to the transaction.
- Disbursing all funds including those for fees, loan payoffs, and commissions.
- Preparing the final statements for each party.
- Securing the policy for the title insurance.
How long is the escrow process?
Escrow is created once the sales agreement is executed. Escrow cannot be closed until all the obligations of the agreement have been met and all documents have been signed. While there is no set number of days for the escrow process, the average length is approximately 45 days. Less complicated transactions can take a shorter amount of time. On the other hand, transactions that are more complicated can take several months to close.