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What is Title and Escrow & How They Work Together

what-is-title-and-escrow

The real estate process is one that involves a lot of different moving pieces to get to the end goal. Money, property, legal policies and a lot more is mixed into a process that will sweep you away if you aren’t prepared, properly informed or assisted. 

Luckily, title company escrow accounts are present to preserve your interests and protect your investments in real estate. By the end of this article, you will have some essential knowledge about 

  • What Title is and its importance 
  • Escrow’s role in real estate 
  • The combination of Title & Escrow   

What Exactly is Title? 

In the realm of real estate, Title has to do with establishing who owns what. More specifically, title is an official document that dictates ownership over any asset in question. 

With every piece of title any person or business can have, protecting yourself with title insurance is important to ensure you will have a safeguard against any situation that endangers your ownership. 

There are two types of escrow title insurance: lender’s policy and an owner’s policy.

Types of Title Insurance

Each type of escrow title insurance could be seen as protecting the interests of different parties in a real estate transaction. 

A lender’s policy offers protection on behalf of the lending party and their interests in a given piece of property. If a claim on property is in any danger, this policy shields lenders from possible damages. In most cases, getting lender’s title insurance mandatory in order to complete transactions and acquire mortgages. 

An owner’s policy is geared towards guarding against an array of unforeseen circumstances. These circumstances can include: 

  • Accidental mistakes in official documents 
  • Malicious tampering of official documents 
  • Instances of fraud 
  • Imposition of a tax lien on property 
  • And more 

With so much value at stake in real estate transactions, ensuring property is in a safe standing is a necessary part of the equation. Titles do a great job of this, but they aren’t the only tool available to keep your interests out of harm’s way. 

What is Escrow?

The process of selling or buying real estate leaves the question of where vital pieces of the transaction will be put open-ended. Escrow is the direct answer to that question, as it is a third-party agreed upon by a buyer and seller, that holds money, titles and other key items in an escrow account until the deal is complete. 

Think of an escrow company as a locker that stores your belongings as you do other things. 

While the parties are progression through a transaction’s phases (e.g. signing documents, housing inspections, verifying title), the escrow account serves as the safe to hold important parts of the closing process to ensure things go smoothly for both sides of the deal. 

Typically, both parties that are involved in closing a home come to an agreed upon price, then find a suitable escrow company that will step in until the close is finalized. 

How Do Title & Escrow Work Together?

The combined efforts of title and an escrow company offer maximum protection against any dangers to the process of closing a home. 

Titles offer protections against accidents and malicious acts that may negatively impact the interests of the buyer. 

An escrow company holds assets and money involved in a transaction as a neutral third-party, and uphold the contractual terms for both sides. 

Navigating real estate can bring a lot of hazards, but title and escrow help to ease the process and make sure your investment is protected.

The seller is usually the only party in a real estate transaction who doesn’t have the option for adequate protection should something go awry. For that reason, New Venture Escrow offers a Seller Protection Plan that keeps sellers safe in the event of a lawsuit or disclosure violation.

Know More on Escrow 

If you want to know more about how title and escrow work, be sure to check out the resources on our website and contact us if you have any questions!     

Click the button below to see our ULTIMATE GUIDE to the escrow process!!

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