Understanding Title and Escrow Services When Buying a Property

Title and escrow services play important roles in most real estate transactions. However, many people may wonder if they’re really necessary. Do you need these services, or is it safe to handle transactions without them? This post will explain what they are and why you should use title services and escrow when buying property.

What You Need to Know about Title and Escrow Services

Real estate transactions involve large sums. With title and escrow services, you have layers of protection for buyers and sellers. An escrow company secures funds and documents to ensure both parties meet their obligations. On the other hand, a title company performs services like title examinations and may assist with transferring titles.

Services Provided

Simply put, a title company provides services that ensure your property is free from legal issues. They perform title searches to discover issues like liens and encumbrances. The title company will also look for issues like title defects or fraud. Many of them also offer title insurance for buyers and lenders.

An escrow company ensures that all parties perform their obligation in the contract. For example, a prospective buyer wants to reserve the property, and he wants it off the market until he can acquire financing. The seller and the buyer can use escrow services to have the buyer deposit an amount in an escrow account. This amount is called earnest money or a “good-faith deposit.” It acts as security for the seller and shows the buyer is serious. If they fail to meet their obligations, the escrow company can release funds to the seller as compensation.

However, it is important to note that earnest money differs from a down payment. It can be part of one, but the funds serve different purposes.

Amount of Earnest Money

Here in Rhode Island, there is no fixed price or percentage with earnest money. It varies depending on the transaction. The price range of earnest money is usually ten percent of the purchase price.

Should Buyers Use Both?

Yes. These services are needed to ensure that real estate transactions are seamless and secure. Title and escrow services deal with different aspects of real estate transactions. Without both, you wouldn’t have as much protection.

Real estate transactions are complex, and they can feel a little overwhelming. Many buyers and sellers would hesitate to act if they couldn’t secure funds or check the title. That’s why these services are essential when buying real estate.

Do you need title and escrow services for a real estate transaction? Click here to contact First National Title & Escrow. We offer complete closing services to ensure a smooth and secure process.

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