Buying and selling property can be a bit confusing if you haven’t gone through the process recently — or ever. You will work with title agents who will handle your title search and provide you with title insurance, but what is the role of a settlement company? Is this the same as the title company? Who is the escrow agent?
Let’s take a deeper look at escrow, gaining a better understanding of what it is and the role your settlement company in Virginia will play.
What is Escrow?
In the context of home buying, escrow is an account that holds money for a future purchase. For instance, when an offer is made and accepted on a property, a Earnest Money Deposit is often given. This will be placed in escrow until the sale is complete. It will then be transferred appropriately.
Rather than a party to the transaction holding this money, it is placed in an escrow account that is held by an uninterested third party — such as an escrow agent. This keeps it safe and secure throughout the duration.
Settlement agents and escrow agents work on the settlement together and, many times, both roles are handled by the same person.
Title Company vs. Settlement Company
Sometimes, title companies and settlement companies are two separate entities. Other times, you can find both services in one location. For those going through the real estate process, it can be comforting to know that everything is going to be handled by the same team — from contract to settlement.
Still, there is a difference between title work and settlement.
The Role of a Title Agent
Making sure the title is clear to close is a major role of title companies. So, from the moment the initial contract to purchase is signed, the title company will begin searching through public records to make sure that it does not have any defects or encumbrances.
Any issues that arise will be addressed and, if able to proceed, title insurance policies will be offered.
This is where a title agent passes the torch to the settlement agent.
The Role of a Settlement Agent
While an escrow agent will have already collected the earnest deposit by this stage, this is the time when the settlement agent will move forward with getting the documents in order for the closing. They will handle retrieving, reviewing, and organizing the documents necessary to complete the transaction between the parties.
Settlement agents can often be found working between the buyer, the seller, the lender, and any other parties involved. Ultimately, they are tasked with ensuring all loan conditions are met before anything is finalized — and before any money changes hands.
At the right time, the escrow agent will handle the transfer of the funds from buyer to seller to complete the transaction.
Many title companies offer title and settlement services in which the escrow agent and the settlement agent work hand in hand to close out a real estate transaction. Sometimes, they are the same person.
Having everything done in one place can increase the efficiency of the homebuying process.