What Is An Escrow Officer?

An escrow officer plays an important role in the mortgage lending process. This professional is an unbiased third party who ensures that real estate transactions between homebuyers, home sellers and real estate agents are carried out correctly. Escrow officers oversee the terms of a purchase contract and confirm that they’re honored by all parties.

What does an escrow officer do?

An escrow officer — also known as an escrow agent — acts as a middleman between all the parties involved in a home sale or refinance. Depending on the laws in your area, an escrow officer may be an attorney or work for a title company.

The responsibilities of an escrow officer typically include:

• Depositing and handling escrow funds. When you buy a home you’ll usually make an upfront “earnest deposit” as a good faith commitment to the seller. The escrow officer deposits this money — typically 1% to 5% of the purchase price — into an escrow account until the transaction is completed.
• Ordering title and property-related documents. The escrow officer works with a title agency to issue title commitments, verify property tax bills and prepare mortgage documents for closing. They also work with a title officer to address any issues that could affect your ability to get title insurance.
• Notifying all parties if there is a title problem. If a title search reveals any title problems (such as judgments or tax liens), the escrow officer contacts the seller and any agents to resolve the issue. If you’re refinancing, the escrow officer will help gather the documents the lender needs to pay off any loans you may currently have.
• Keeping everyone informed about closing timelines. Escrow officers keep an eye on the closing timeline to make sure a home purchase closes on time. For a refinance, they’ll ensure that the loan closes before your rate lock expires. They often communicate with multiple parties including sellers, real estate agents, loan officers, title agents and local recording offices.
• Ensuring loan and contract paperwork is signed correctly. Mortgages and purchase contracts must be signed, dated and notarized according to federal and state laws, and escrow officers oversee the closing process to avoid delays at the end of a transaction.
• Disbursing closing funds and submitting documents for recording. The escrow officer tracks funds from your lender and pays money to sellers, real estate agents and lenders according to the instructions provided in the paperwork. They may also submit signed documents to finalize the transfer of ownership, officially putting the property into your name.

Who chooses the escrow officer?

Lenders and real estate agents often have business relationships with title companies and choose an escrow officer on your behalf. However, escrow and title services are listed as “services you can shop for” on your loan estimate, which means you have the right to shop around for the best deal on escrow and title fees.

→ When you buy a house, who you choose to be your escrow officer is a matter of negotiation between you and the seller, and will be entered into your purchase contract.
→ When you refinance, you’re entitled to choose whomever you prefer. You may receive an extra discount on refinance escrow services if you worked with the company that handled the escrow on your home purchase.

Is it worth it to shop for escrow and other closing services?

Taking the time to shop around for closing services — including escrow fees — can save you thousands of dollars. Escrow fees typically cost 1% to 2% of the home’s sale price which, at today’s median home price, comes to around $4,100 to $8,200.

But you may want to shop around for more than escrow fees. You can save additional money — often $500 on title services alone — by shopping around, according to the Consumer Financial Protection Bureau (CFPB).

Who pays escrow fees: Buyer or seller?

It’s common for the buyer and seller to split escrow fees 50/50, but there’s no law or rule requiring them to do so. Who pays the escrow fees is negotiable, and it’s not unusual for a buyer or seller to take on 100% of the escrow costs.

However, you may want to ask your real estate agent about the customs in your local market before you formally request that the other party fully cover the escrow fees.

Beware of escrow scams

Be very careful when it comes time to wire your closing funds. Scammers can try to trick you into sending them the money by impersonating someone involved in your real estate transaction, like your lawyer, title agent, real estate agent or escrow officer. If you receive an email from anyone that includes wire instructions, you need to confirm in person or by phone that these instructions are legitimate.

For more tips on how to avoid mortgage closing scams, visit the CFPB’s website.