Real estate is a vast market, raking in about $349 billion in revenue in 2021, according to
Statista. Considering home prices reached an all-time high in July 2022, real estate agents have to deal with huge sums of cash.
As you’ve probably guessed, an industry awash with such large sums of money will ultimately
face issues with criminals. According to FBI data, about 11,578 real estate players lost $350 million in 2021 due to wire fraud.
That’s where escrow companies come in handy as they ensure the cash transfers safely from
the buyer to the seller, so here’s a look at how real estate agents can work together with escrow companies to minimize fraud.
Ways real estate agents can work with escrow companies
During a transaction for a sale of a property, both the seller and buyer might contract a real
estate agent to help them close the deal. In short, a real estate agent will likely be representing one of the parties in the deal, so is likely biased.
An escrow company would come in as an impartial or neutral third party in the transactions.
They represent no party in the transaction—they are only after ensuring a safe cash transfer.
Therefore all parties are assured that the escrow company is there to safeguard the rights of all parties.
In a typical property buying transaction, the buyer will deposit earnest money (good faith
deposit) to prove they are serious about the transaction. The seller will pocket the money if the buyer is at fault for not completing the transaction. However, that money will count towards the down payment if the transaction goes through.
This is where the escrow is beneficial, as they will act as the unbiased official to protect both the buyer and seller. An escrow will follow the transaction in the background and only release it to the rightful person after the completion of the transaction.
Escrow companies are also great when applying the escrow holdback, a situation where the
escrow company will hold the money safely after the transaction.
It may be necessary to do that in situations where the seller will occupy the property for some
time before vacating it. Moreover, the escrow holdback is required where the buyer finds fault
with the property, which needs fixing before they take possession. The escrow company will
only release the money once the buyer is satisfied with the work.
Some escrow companies may even provide a centralized platform where the parties can communicate and track the transaction’s progress. Real estate agents don’t even have to worry about charges from escrow providers, as referral fees are illegal.
How real estate agents can benefit by joining forces with escrow
The main reason is the safety escrow companies provide. Whether you are the buyer or seller, a reputable escrow services provider safeguards the down payment until completion of the transaction.
That said, the most underrated function of escrow providers is their role in ensuring compliance with procedures, taxes, and homeowners insurance. Since the tax and insurance amounts keep changing, the escrow provider will ensure that both parties comply with the requirements till completion.
Escrow companies will typically follow up on all the paperwork to ensure the new buyer acquires the title, which explains why most escrow providers double up as title companies. They will save the real estate agent a ton of work needed to get the transaction over the line.
Real estate agents and escrow companies can gain a lot by working together. The escrow company is the independent party that looks out for the rights of both parties and ensures compliance with procedures. On the other hand, the real estate agent will bring business to the escrow company.
Contact Element Title today for professional and trustworthy escrow services if you’re a real estate agent.