The Importance of a Good Escrow Officer

What is an Escrow?

Escrow is a legal term that generally refers to money held by a third-party on behalf of transacting parties. It is an account separate from the mortgage account where deposit of funds occurs for payment of certain conditions that apply to the mortgage, such as insurance and mortgage taxes. And, of course, it can be used to receive funds to apply to the purchase of real estate property itself.

The concept of Escrow is best known in the United States in the context of real estate. It is specifically in mortgages where the mortgage company goes ahead and establishes an escrow account to act as a third-party fiduciary intermediary during the term of the purchase and sale.

What is an Escrow Agent?

An escrow agent is a third party depositary of an escrow. He or she is a neutral third party that holds documents or other property (often instruments, such as funds or deeds) until the occurrence of a specified event (ex. a closing), at which time the agent makes disbursement or delivery in accordance with the parties’ instructions. Escrow agents are usually employed by the title/escrow company that you are actually transacting with. Therefore, an escrow agent is expected to be an impartial stakeholder of the items that have been placed under his or her jurisdiction.

Various Duties of the Escrow Officer

An escrow officer should possess strong interpersonal and oral communication abilities that are necessary when dealing with multiple personalities and roles such as real estate sellers, buyers, agents and brokers. Basically, you should LIKE your escrow officer and I don’t necessarily mean the Facebook kind of ‘like’!

Escrow officers should have good client relations and organizational skills and be up to date on current fiduciary practices. They must also be detail-oriented, trustworthy and professional when dealing with sensitive and confidential real estate transaction information.

They always make sure that there is proper accounting for the escrow funds and they also ensure that usage of funds is explicitly for the purpose(s) intended. This is to reduce fraud cases or misuse of funds. They are also responsible for facilitating the transfer and the hold of funds for lenders, sellers and the buyers. The duties of the escrow officer further include the reviewing of real estate contracts, loan applications and deeds when necessary.

These professionals must make sure that all parties fulfill their legal and financial obligations before funds are disbursed and escrow transactions are completed. This enables your real estate transactions to happen without any complications.

It is the work of an escrow officer to walk you through the closing process. Before any document is signed, it is the duty of the officer to help the buyer understand the contract.

The officer also will also perform the title searches (assuming an escrow/title company is used) and then prepare final paperwork. They also witness the document signings as well as ensure that the transaction is executed properly and legally.

Choose Your Escrow Officer Wisely

People often underestimate the value and importance of a good escrow officer. Whether your intent is to flip a house, buy a house for cash flow or as your own residence, your escrow officer plays a key role. Don’t just choose someone based on their business card or title attached to their name. Now that you have a better understanding of their role and responsibility, interview as many as you need to align yourself with someone who’s professional, knowledgeable, trustworthy and will have your best interests at hand.