Escrow Agent vs Closing Agent
By knowing what you are doing, buying or selling real estate should be a fun and exciting journey. However, buyers and sellers are often presented with contracts and told to “sign here” but given no explanation to what they are entering. Under Tennessee law, real estate agents are not allowed provide their clients with legal advice as they are not licensed lawyers.
Unbeknownst to many buyers and sellers, real estate contracts contain language to protect agents from buyers or sellers who claims their agent gave them wrong advice. Therefore, all real estate transactions should have an attorney or third party involved to insure a non-biased closing occurs. Because of this, third-party involvement during the contract and closing process can save a buyer or seller tens of thousands of dollars in legal expenses by preventing mistakes that went without correcting
In determining escrow agent vs closing agent, let’s first look at the escrow agent. One of the most frequently asked questions by our clients would be, “What is the difference between an escrow agent and a closing agent?” Traditionally, when a buyer and seller go under contract the buyer agrees to make a good faith deposit to an escrow agent. A good faith deposit is also known as Earnest Money or Trust Money. The dollar amount of the deposit varies between contracts and is a negotiable term between the parties.
The escrow agent is merely the “holder” of the deposit and is a neutral third party to the transaction. In Knoxville area closings, the escrow agent is often located within the title company being used for closing. The escrow agent can be described as a trustee to both parties to the contract. They are also charged with the performance of a specific duty, to “hold escrow” under the terms of an escrow agreement. All of these details are usually incorporated into the sales contract.
On the other hand, a closing agent is an entity that performs the “closing” under the terms of the contract. It is the entity that provides the title and settlement services required to convey the title from the seller to the buyer. More specifically, it is the entity that prepares what is commonly known as the “closing documents.” These documents include the deed, bill of sale, settlement statement, and any required notices.
They Can be Within The Same Entity
As stated previously, the closing agent and escrow agent are usually within the same entity. However, they do not have to be. For example, the seller may request that ABC Title be the closing agent, but the buyer may request that his lawyer hold the escrow. In that situation, the escrow agent and closing agent are two different entities.
Identify Your Agents’ Roles
So why is it important for buyers and sellers to know who their escrow agent is? The reasons are many; however, some of the primary ones are: (i) whether or not the escrow agent is complying with Tennessee law as to the requirements of holding escrow; (ii) that the escrow agent has deposited the buyer’s funds in a reputable account so that they are available for closing or in the event of default; and (iii) that the money is not lost.
Key takeaway: have trained real estate professionals on your side to guide you through the process. Furthermore, make sure you know the role of all parties involved in the transaction. Crossland Title is here to help, and only a phone call away for all your title service needs.