An escrow officer is a neutral third party who holds funds passing between a buyer, seller or lender. The account operated by the officer is called an escrow account. Escrow accounts function both as a good-faith negotiating tool as well as a security tool; they show the paying party's earnest commitment to a deal by locking up guaranteed funds for the receiving party. Escrow officers can also be loan officers who set up accounts to hold funds used for mortgage payments, insurance and property taxes. Escrow agents can also oversee other aspects of a transaction, such as the signing of paperwork, the implementation of title insurance when dealing with real estate, and other processes involved in the closing of a deal. In other words, an escrow officer helps ensure that everything involved in a transaction proceeds legally and fairly.
The use of an escrow officer is mainly associated with real estate transactions. When dealing with property, an escrow officer may be used while a contract is pending between seller and buyer. The buyer gives a certain amount of money to an escrow officer, which is deposited into a neutral third-party account until the transaction is finalized, whereby all funds are transferred to the seller. Escrow officers can also handle earnest money deposits — different from a down payment on a mortgage — which are deposited into an escrow account to show the seller that a potential buyer is serious about pursuing a property.
Real estate escrow accounts don't just occur between a potential buyer and seller; they can function for any deal occurring between two parties. A lending company, rather than giving out a lump sum to a borrower, may release portions of a loan over time via an escrow account. When a tenant pays down a security deposit for a rental, a landlord will typically hold those funds in an escrow account to guarantee that the tenant's money is stowed in a safe and neutral place. Concerning a property owner with a mortgage, an escrow account may be set up by the mortgage-lending company — acting as an escrow officer — specifically for holding funds for paying off mortgage payments, property taxes and insurance.
Escrow officers, as neutral third parties, are generally trained and equipped to handle any facet of a transaction. An escrow officer for one transaction may simply help transfer purchasing funds; another escrow officer may help handle nearly every detail of a deal from beginning to end. Escrow officers also handle more complicated transactions, such as liens, whereby one party pays off another party's debt in return for payments with interest. One looking for an escrow officer can usually find one working for a title company or financial institution.