An escrow company is a third party that is neutral to a transaction, particularly in real estate, between two or more parties. The escrow company typically holds documents, funds, and instructions regarding the sale of real estate until all the conditions of the transaction are met. The company may also ensure the details surrounding the sale are handled properly.
Generally, the escrow company is an impartial party in the sale of real estate. The company holds the money of the buyer or the title of the seller. It doesn't release the money or the title until all of the specific conditions of the sale are met. Once the conditions have been met, the company may prepare closing documents and transfer the property to the buyer or the money to the seller.
There are two main kinds of escrow companies: independent businesses and operations that are run by the realty company or a bank. With an independent company, the sole purpose is to close escrows. They are typically licensed and their staff usually has experience in all aspect of closing escrows. Sometimes banks or realty companies have escrow departments, but they may be less experienced in handling escrow.
In the United States, all the states mandate using escrow for the sale of real property. In some states, an attorney can be used, but in many states an escrow company must be used. The company does not need to be local, but a local company may be more knowledgeable with the local escrow laws. The fees the escrow company charges can be paid entirely by the buyer or the seller, but in most cases, they are divided equally. Escrow companies are also used across much of Europe and Asia.
When selecting an escrow company, it is important to find one that is legitimate, whether in the United States, Europe, or Asia. If a company is recommended though an online seller or buyer, it is best to scrutinize the suggested company before using it. In addition, when calling a company’s customer service phone number, a live agent should be available. Using a company that fails to list a phone number or address is not recommended.
Online escrow companies are becoming increasingly popular. It is important to verify any credentials or endorsements before using an online website for escrow services. The company's license should be registered with the local licensing agency for verification, and it may be a good idea to check the domain name to ensure the company did not originate a few months ago. Other red flags for fraudulent companies include poor website content, a request for payment to an individual rather than the company, and unbelievable deals.