Title Company Vs. Escrow Service: What's The Difference?

Real Estate Agent with SpringsHomes

The phrase is title company and escrow service get thrown around a lot during a real estate transaction. While these two entities have many similarities in terms of the functions they perform but at the end of the day are very different. If you're buying or selling a home, you really should understand the difference between a title company versus an escrow service.

A title company is a business that provides services related to the transfer of ownership of real estate. They typically act as an intermediary between buyers and sellers, providing escrow services, title insurance, and closing services.

An escrow service is a company that helps to manage the transfer of ownership of real estate by acting as the middleman between buyers and sellers. They typically provide escrow services, such as holding funds and managing paperwork and deadlines until the property is sold.

The big differences revolve around insurance and closing. The title company is essentially an insurance company that provides escrow services and closing services. The escrow service can hold money and prepare documents for closing but they do not underwrite title insurance policies, nor do they administer closings.

In many states we see attorneys closing real estate transactions. This is a good example of a case where someone might use an escrow service as opposed to a title company. The escrow service would hold all funds, collect documents, and prepare for closing ultimately handing the file off to an attorney to close.

The title company is clearly a more convenient option simply because they handle the transaction from start to finish. The title company coordinates with the mortgage lender to find out what and how the payoff for the existing loan will work. They also work with the buyer's lender in order to set up escrow accounts for pre-paid closing expenses. The title company also coordinates with the county recorder to have the property's recorded transfer. Once a deal goes under contract, the title company acts as a sort of one-stop-shop for all your closing needs. On the other hand, an escrow service handles a much narrower scope of duties.

Whether you use a title company or an escrow service to help close your real estate transaction really depends on where you're located, and whether or not you're working with a realtor. Realtors have relationships with title companies, attorneys, and escrow services. In general, the realtor will send the file to whomever they are most comfortable with. Of course this is all discussed with the homeowner prior to listing the property. 

If your home was sold by owner or to some ibuyer, you may well end up closing with an attorney and using an escrow service. Either way, it's worth your time and energy to do some investigation as to what is right for your situation, an escrow service or a title company.

Comments (2)

John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Hello Joe Boylan very good helpful report about the difference of title company vs. escrow service.

Apr 18, 2022 02:23 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Interesting comparison.  We only use title companies here in Arizona.  Not sure that an escrow service even exists here.  

Apr 26, 2022 10:32 AM