Escrow Agent Versus Closing Agent. What’s The Difference?
Buying or selling real estate should be a fun and exciting process…if you know what you are doing. However, all too often, buyers and sellers are presented with contracts and told to “sign here” but are given no explanation as to what they are entering into. Under Florida law, real estate agents are unable to provide their clients with legal advice as they are not trained and licensed lawyers. In fact, unbeknownst to many buyers and sellers, many real estate contracts contain language that is specifically drafted for their protection in the event a buyer or seller claims their agent gave them wrong advice. Therefore, all real estate transactions should have an attorney involved so that a smooth stress-free closing occurs. Many times an attorney’s involvement during the contract and closing process can save a buyer or seller tens of thousands of dollars in legal expenses post-closing for mistakes that went uncorrected or unknown!
One of the most frequently asked questions from buyers, sellers and real estate agents is what is the difference between an escrow agent and closing agent. Traditionally, when a buyer and seller go under contract the buyer agrees to make a good faith deposit, also known as an earnest money deposit (“EMD”) with an escrow agent. The 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. The escrow agent can be described as a trustee to both parties to the contract and is charged with the performance of a specific duty, to “hold escrow” pursuant to the terms of an escrow agreement which is usually incorporated into the sales contract.
A closing agent is the entity that performs the “closing” pursuant to the terms of the contract. It is the entity that provides the title and settlement services required in order to convey title from the seller to the buyer. More specifically, it is the entity that prepares what is commonly known as the “closing documents” which include the deed, bill of sale, settlement statement, and any required notices.
Many times, the closing agent and escrow agent are one of the same. 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.
So why is it important for buyers and sellers to know who their escrow agent is? The reasons are many but some of the primary ones are: (i) whether or not the escrow agent is complying with Florida 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 in the event the escrow agent goes out of business or files bankruptcy. The later situation arises quiet often, especially when there is an economic downturn.
Key take away….have a trained real estate attorney on your side to guide you through the sales process. The attorneys at Barry Miller Law are here to help and only a phone call away.
Please note this article is for informational purposes only and should not be construed as legal advice. The facts and circumstances of each case, transaction, or matter can differ greatly. You should not use this information as a substitute for consulting with a licensed attorney. Barry L. Miller, P.A., and its attorneys, and staff, do not represent you unless you execute an engagement agreement with the Firm which confirms that representation.
Barry Miller Law is familiar with all aspects of real property law. If you, or someone you know, has legal questions concerning real estate, business or probate law, contact Barry Miller Law for assistance at 407-423-1700 or email us at info@BarryMillerLaw.com for a consultation.