What Is an Escrow Agent?

Real estate agent with couple closing a deal
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DEFINITION

An escrow agent is a third party or other neutral person who manages the property in an escrow account.

Definition and Examples of Escrow Agents

An escrow agent protects the property in an escrow account during a real estate transaction. Acting as a third party, the escrow agent is responsible for witnessing document signings, processing paperwork, explaining available services to prospective homebuyers, and approving and disbursing funds in the final steps of the acquisition.

Escrow agents don’t work for the buyer or the seller; they must remain impartial during a transaction. They typically work for title companies, mortgage lenders, or credit unions. As a neutral party, the duties of an escrow agent are to both the seller and the buyer. These include the duty to make a full disclosure and to exercise a high degree of care to the property in the escrow account. Escrow agents also have a fiduciary duty to the two parties.

When a person has a fiduciary duty to someone else, that person must act in a way that benefits the other person, known as the beneficiary. This is usually financial in nature.

  • Alternate names: escrow officer, depositary, title agent

How Escrow Agents Work

Let’s say you and your spouse are looking to purchase a property. You’ve found the perfect place, put in an offer, and have signed the purchase offer. At this point, you’ve also sent in your earnest money—a deposit toward the purchase—which is then placed into the escrow account.

The escrow agent will help walk you through the process of closing, including completing a preliminary title search; making sure all the lender’s requirements are met; ensuring all the contingencies in the contract have been met; and taking care of the funds from both you and the lender, among other things.

Once the escrow agent is certain everything has been satisfactorily completed, they can close the escrow, record the deed, and disburse all funds.

After the escrow agent has finished their work, you—the buyer—will have the keys to your new home, the seller will have all their funds, and the lender will have issued a new mortgage.

There is no set time period for the escrow process, but due to the complexity of closing, the average time to close is 49 days per June 2021 figures.

Do I Need an Escrow Agent?

Legally speaking, you don’t need to employ an escrow agent. In real estate transactions, however, it is a good idea to do so. This is because an escrow agent will take on many duties to facilitate closing; without the agent, the process is extremely complicated and it’s easy to miss things. As a fiduciary, the escrow agent has the best interests of both the buyer and the seller in mind.

Although there are no set rules about who must pay the fees for the escrow agent, the costs are usually split between the prospective homebuyer and home seller. You can opt to negotiate these fees so that one party pays them in full.

Article Sources

  1. Citrus Heritage Escrow Inc. "How To Become an Escrow Agent." Accessed Sept. 14, 2021.

  2. ICE Mortgage Technology. "ICE Mortgage Technology Origination Insight Report June 2021." Page 4. Accessed Sept. 14, 2021.

  3. Key Title and Escrow. "Do I Have To Use an Escrow Company To Buy a House?" Accessed Sept. 14, 2021.

  4. American Family Insurance. "What Are Escrow Fees?" Accessed Sept. 14, 2021.