What is Escrow?
An escrow, or escrow account, refers to a special transaction of money and documents held to one side to help facilitate transactions, like the purchase of a house. When purchasing a home, you’re asked to sign and provide a large amount of documents and also deliver lump sums of money–earnest money in particular.
As a full service title and escrow company, Continental Title helps to facilitate all aspects of the closing process, including any escrow needs. In our expert hands, escrow is used to keep all earnest money, and any additional financial aspects mentioned in the contract, safe and set aside until all parties are satisfied and the home has been properly transferred to the new owner. If a home purchase goes wrong (cold feet, undisclosed problems, etc.), the title company acts as the middleman, ensuring that the funds go to the appropriate place.
Purchasing a home isn’t the only time that the term escrow account is used, however. After purchasing, escrow accounts also can be used for homeowners to deposit a specified amount of taxes and insurance every year. Why do this? Well, homeowner’s insurance is oftentimes a requirement for obtaining a mortgage, and paying taxes is a requirement for owning a home. To prevent any confusion or conflict with the bank and government when it comes to pay the bills, banks typically will offer to roll your mortgage payment and your escrow payment (taxes + insurance premiums) together. Then, at the end of the year, this is paid out without you having to do any paperwork or scrambling for money. This escrow account is not handled by the title company, but rather by the mortgage company to keep the funds safe until it is time to pay the required bills.
In either case, an escrow account is an account specifically set up to hold funds in a safe place before a transaction is completed. Purchasing a home, or setting aside money for taxes and insurance are two of the most common uses of the term.
What Is The Title of A Home?
Given that many escrow companies often have the term title, or title insurance, in their name you may ask yourself if title and escrow are the same thing? They are not, but often act as bookends to the home purchasing process. While the escrow deposit, along with a signed contract signal the start of the home purchase process; the other end of the spectrum is the title insurance policy. Typically, homeowners think that the deal is complete when the keys are in their hand. While that is a HUGE part of the process, the final piece of the puzzle is the title insurance policy.
The title insurance policy, or owner’s policy, is the document that details the ownership of your property. The owner’s policy highlights who the new owner of the property is, according to the public record. It also shows who may have an interest in that property, your mortgage company for example. The title insurance policy protects against any unknown liens (deeds, mortgages, etc.), unrecorded interests (laws, statutes, ordinances, etc.), and unknown interests that may apply (unknown inheritors, marriages, forgeries, etc.). From the moment you sign the contract to getting the owner’s policy in your hands, title companies are responsible for making sure all of the terms of the contract is met and the history of ownership for your property is thoroughly researched, so no ugly surprises pop up. Given the breadth of work that goes into such a deal, it is important to work with the most experienced and reputable companies, like Continental Title.
What is a Title Company?
Because of the complexity and precision needed to capably handle large transactions like the selling of a house, real estate agents, homeowners, and banks hire specialists–Continental Title, to facilitate escrow and to research and disseminate the chain of title. At Continental Title, we consider it our responsibility to protect you from any past issues that can arise, while ensuring your closing goes as smoothly as possible.
We believe that our job is more than just facilitating a closing and the related policies. We pride ourselves on educating our customers every step of the way. If you have questions about your upcoming closing, or if you want to know more about the process, please reach out to our team. In addition to offering regular classes and seminars on the process, we are always happy to chat about the ins and outs of title insurance and escrow accounts. Find a location near you or download our app to learn more.