Escrow: What You Need to Know

As Florida mortgage problems continue to escalate, regulators and analysts are looking for all sources of trouble throughout the application process.

One facet recently spotlighted has been the role of the escrow service. It is often overlooked, and important to understand. Let’s investigate.

What is an escrow?

Money and documents deposited with an escrow officer are used and disbursed through written instructions of all the parties involved in a Florida real estate transaction.

How does an escrow work?

The escrow process typically starts after a buyer and a seller agree to a deal and sign a contract. An escrow officer gets the contracts and begins working on transferring title of the real estate, contacting the Florida mortgage lender, prorating property taxes, ordering inspections and researching any payoffs, including the transaction.

At the date of closing, the escrow agent disburses funds to the parties and records the new documents of ownership.

Whom does an escrow officer work for?

The escrow officer’s role is to be a fiduciary, with duties to all parties who have an interest in the escrow property. The most important duty is to safeguard the escrow property.

An officer who releases escrow property in violation of an escrow agreement is subject to regulator fines and penalties as well as criminal charges for theft.

Lately, regulators are investigating many such acts as perpetrations of Florida mortgage fraud.

How does one pick an escrow firm?

A real estate agent or Florida mortgage broker often has an escrow officer they regularly work with, and if their businesses are affiliated in any way, that must be disclosed to the customer.

Home buyers and sellers can always choose their own escrow or title firm and question any fees. As we know, the Florida real estate market is very competitive, and most escrow firms rely on volume to make more money, so escrow fees are also competitive if you shop around.