Closing Agent, Escrow Agent, Title Agent – What’s the Difference?

June 8, 2022by Brandon Banks

It’s like the old joke about screwing in a lightbulb … How many people does it take to close a simple real estate transaction?

There’s the closing agent, the escrow agent, the title agent … maybe a settlement agent, a title processor, a title insurance agent … What do these people even do? Are they just different terms for the same thing? 

First things first — although what happens behind the doors of the title office may seem obscure, it is very necessary. Title complications are common; title offices solve dozens of problems in every transaction so you don’t have to.

And every now and then, someone at a title office catches a potential disaster, saving the financial bacon for the purchaser. Imagine taking out a six-figure mortgage on a property that the seller doesn’t even have the right to sell, because someone screwed up the recording of a deed years ago. The fraudulent seller walks up with the mortgage money, you’re on the hook to the lender, and you don’t even have a home to show for it!

These kinds of title disasters do happen, and they only get nipped in the bud thanks to the diligent work of a whole team, either in one title office or working together across multiple offices. Pick good title professionals, and you will never have to worry about it — it all happens in the background, and all you need to worry about is brainstorming paint colors and planning the housewarming. 

But considering what’s at stake, it can be good for peace-of-mind to know what these characters are doing behind those closed doors. It can not only help you ask informed questions, but also pick the right title companies in the first place.

Let’s dig into the actual roles of three important characters in the behind-the-scenes cast of a real estate transaction … 

1. Closing Agent

The person a purchaser will have the most facetime with at the title office is the closing agent. In fact, the closing agent will probably hold a very fond place in the purchaser’s memory because the closing agent is the last person they will sit down across the desk from before someone hands them the keys to their new house or investment property. 

As the name implies, the closing agent is responsible for the closing, as in the closing of the deal. At closing, the process that started with the purchase contract — earnest money, inspections, contingencies, appraisals, renegotiation, due diligence, title work — finally ends. Money changes hands, title changes hands, and the contract is certified as fully executed.

The closing agent is the person who will examine the closing documents, present the documents to the buyer, review the documents with the buyer, answer any or all questions, and walk the buyer through the process of executing the documents. The closing agent then makes sure the executed documents are delivered to all interested parties so that the sale is recorded, legal, and final. 

Of course, the closing agent must verify that all the work it took to get the documents ready for the closing table has been properly completed. Depending on the traditions of the state or jurisdiction you find yourself in, the closing agent might be referred to as the “settlement agent.”

2. Escrow Agent

The escrow agent has a very different role from the closing agent and the title agent. The job of the escrow agent is to be a fiduciary for the funds in escrow. 

A fiduciary is someone who is required to put the interests of a beneficiary ahead of their own benefit — they essentially act on the benefit of others. In the case of escrow, the fiduciary handles money or other assets for the benefit of someone else, not themselves. 

If someone has “fiduciary duty” over $20, they can’t just take that $20 and spend it any way they like. They are required, under that duty, to spend or dispose of that $20 as the beneficiary directs them.

This is very good news in a real estate transaction, of course. The earnest money, the loan proceeds, the down payment … until closing, all that money is sitting right there in a bank account controlled by the escrow agent or title office. What’s to stop them from taking that money for themselves and buying a yacht instead of using that money to close the transaction? Their fiduciary duty stops them. 

Let’s back up … What is “escrow” anyway, and why does it happen?

Escrow is basically a “middleman” service that makes sure both parties to a contract fulfill their end of the contract. 

What if the seller signed over the title, only for the buyer to stiff them on the purchase price? What if the buyer hands over all the cash — and takes out a six-figure loan in the process — only for the seller to refuse to sign over the title? 

The escrow agent is there to ensure that this doesn’t happen. The seller doesn’t sign over the title to the buyer until all the cash required to close is in escrow, under the fiduciary care of the escrow agent. And the funds don’t get distributed to the seller until the title is signed over.

3. Title Agent

The title agent also has a distinct role from other functionaries at the title office. “Title agent” is actually shorthand for “title insurance agent.”

Yes, the title agent is an insurance agent. But they also fulfill other functions as well. For instance, they verify that title to a property can legally be transferred from the seller to the buyer. If they find an issue that could hinder the transfer of ownership, they work to remove that hinderance. Unfortunately, the process of finding what are known as title encumbrances and defects is not perfect and some issues are not caught.

There are any number of reasons an issue could be missed, probate, fraudulent deeds, defective documents in the chain of title and a whole host of other issues. It’s not very common for an issue to be missed. However, the title company is responsible for confirming that the sale can legally be closed. If there is a problem with the title that they don’t catch, they may close the transaction, only to find out later on that the title wasn’t legally allowed to change hands.

In the event of such a title-transfer calamity, both the borrower and the lender can recoup their losses by making a claim against the title insurance they purchased from the title agent. The buyer doesn’t get the property, but at least they aren’t left empty-handed.

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