What is the Difference Between Title and Escrow?

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What is the Difference Between Title and Escrow?

There seems to be a lot of confusion between title and escrow and how they impact a real estate transaction. Some people use the terms title and escrow interchangeably when they are actually very different. If you’ve ever wondered, “What’s the difference between title and escrow?” Primary Residential Mortgage is here to help! Read on to learn the differences between title and escrow and to find out why they are essential to protecting both the homebuyer and home seller.

What is Escrow?

Buying or selling real estate typically involves the transfer of large amounts of money. It’s therefore essential that a neutral third party handles the transfer of the funds and recording of related documents from buyer and seller. That is the responsibility of the escrow company. All conditions of the sale must be met before the real estate and funds change hands. The Escrow company impartially carries out the written instructions given by the principals in the transaction (buyer, seller, and lender). This includes receiving funds and all documents necessary to comply with those written instructions, completing or obtaining the required information, and handling the final delivery of all items to the proper parties upon the successful completion of the escrow transaction.

What is Title?

A title is how ownership transfers from one person or business to another, and it is made up of three essential elements:

  • Rights and interests that are published in public records (such as deeds, mortgages, and leases);
  • Rights and interests that are not recorded but exist (such as limitations imposed by laws and statutes);
  • Rights and interests that are hidden (such as forgeries, secret marriages, and unknown heirs).

Every title, whether it be for a vehicle, house, or something else, is made up of many different “rights” and “interests” that may be owned by various parties. The most valuable rights and interests are owned by the property’s owners. Still, others may also have known or unknown rights to the property, such as liens for unpaid utilities, homeowner’s dues, or mortgages.

  • Title insurance protects your rights against the following:
  • False impersonation of the valid owner of the property
  • Mistakes in recording legal documents
  • Misinterpretations of wills
  • Deeds by persons of unsound mind
  • Deeds by minors
  • Deeds by persons supposedly single, but in fact married
  • Forged deeds, releases or wills
  • Undisclosed or missing heirs
  • Instruments executed under an invalid or expired power of attorney
  • Liens for unpaid estate, inheritance, income or gift taxes
  • Fraud

Without title insurance and the use of an escrow company, there is a significantly higher risk of errors, omissions, and fraud in the real estate transaction. That’s why it’s essential to use a reliable title and escrow company. If you have more questions about title or escrow or would like a recommendation for a reputable title or escrow company, Primary Residential Mortgage can help. Give us a call today.

 

Note: Opinions expressed are solely my own and do not represent the views of my employer.