Escrow vs Title Company: What’s the Difference?
If you’re buying or selling a home, chances are you’ll hear the terms “escrow” and “title company” — sometimes even used interchangeably. While they often work closely together, they play very different roles in a real estate transaction.
Here’s a quick breakdown of what each does and how they help ensure your home purchase goes smoothly.
What Is Escrow?
Escrow is a neutral third party that holds money and documents until all conditions of a real estate transaction are met.
Think of escrow like a digital vault.
When you make an offer on a home, you’ll typically deposit “earnest money” into escrow — this shows the seller you’re serious. The escrow company then holds that money safely while everyone works to complete the transaction.
Escrow’s key responsibilities:
Holding earnest money and down payments
Managing the release of funds at closing
Making sure all paperwork is signed and conditions are met
Coordinating with lenders, agents, and title companies
In short, escrow protects both the buyer and the seller, ensuring no funds change hands until all agreed-upon steps are completed.
What Is a Title Company?
A title company focuses on the legal ownership of the property. Its main job is to make sure the title (ownership rights) is clear — meaning no outstanding liens, unpaid taxes, or ownership disputes.
Title company duties include:
Performing a title search (a deep review of the property’s history)
Issuing title insurance to protect buyers and lenders from hidden ownership issues
Preparing the deed and title documents
Helping close the transaction, often in tandem with the escrow company
Title insurance is a one-time cost that protects you from financial loss if a title issue arises after the sale — such as an unknown heir or an unpaid contractor lien.
How Do Escrow and Title Companies Work Together?
In many states, one company may handle both title and escrow services. In others, they’re separate entities that coordinate closely.(Hywater does both!)
The title company ensures the property’s legal ownership is sound.
The escrow company ensures the transaction runs smoothly, holding and disbursing funds properly.
Together, they act as the legal and financial backbone of your home closing process.
Bottom Line
Escrow = safeguards the transaction.
Title company = safeguards your ownership.
Both are essential to a secure and successful real estate closing. Understanding the difference not only helps demystify the process — it also empowers you to ask smarter questions and protect your investment.
Need help choosing a title company? You’re on our blog, so you may as well use Hywater!
