Title vs. Escrow Agents

What is the difference between a Title and Escrow Agent?

The Title Company (and Title Agent) runs the title search, issues the buyer’s and lender’s title insurance, and files and records the title transfer with the municipality.

The Escrow Company (and Escrow Agent) is the neutral third party that holds funds and property in an Escrow Account until the buyer and seller fulfill their contractual obligations established by the Purchase and Sale Agreement (PSA). When all parties fulfill their obligations, the escrow agent releases the funds and property to the appropriate party (buyer, seller, lender.)

The Escrow agent also guides most of the closing process, prepares transaction paperwork, and delivers documents and funds to the lender. 

The confusion between the two lies in that many title companies offer escrow services. So in many cases, the Title and Escrow Agent are the same—and the terms are used semi-interchangeably. However, individually these services are not the same.

Why do Title Agent and Escrow Agent matter?

The Title Agent and Escrow Agent protect the interests of the buyer, seller, and, in a financed purchase, the lender. The Title Company protects the buyer from purchasing a property without  a clear title and provides insurance to the buyer and lender if any title issues arise after closing.

The Escrow Agent makes sure that the funds and property exchange is handled according to the PSA. They protect the buyer and seller from being defrauded (e.g., the seller keeping Earnest Money despite the buyer rightfully invoking a contingency and canceling the deal).

Who chooses the Title and Escrow Companies?

Generally, the party paying for title insurance (usually the buyer) chooses the Title Company. The buyer also chooses the Escrow Company, but the buyer and seller must agree on the choice. It is important to note that the seller cannot make using a particular Title and Escrow company a condition of the PSA.