The short answer is no. You do not legally need to use an escrow company or even have an escrow account to buy a house. That doesn’t mean you shouldn’t. Buying a home is almost never as simple as the seller writing a check and giving it to the buyer, who then turns over the deed. The cases where this happens is rare. There are almost always going to be others involved in the process, such as mortgage lenders, real estate agents, etc. Buying a home requires satisfying the needs of many people, not just the buyer and seller. Using an escrow company protects buyers, sellers, and lenders from making a bad deal and losing money. Nobody wants to lose money, and not having an escrow company to help you through the process can be risky.
Advantages of an Escrow Company
Security is one of the biggest advantages of using an escrow company. As mentioned above, the job of the escrow company is to protect all parties. Almost nobody would consider buying a home without using a neutral third party, typically called the escrow holder. There’s just too much risk involved. With an escrow company, and escrow officer will hold all of the documents and money associated with the sale of the house in an escrow account. They will also make sure that everything is properly filed and recorded. The escrow company will see that all obligations have been met by the buyer and seller before any money or documents change hands. Buyer and seller don’t need to trust one another when everything is handled by an escrow company, and the risk of any kind of fraud is almost non-existent. Your personal information, needed for real estate transactions, is kept secure as well, including bank account numbers, social security numbers, and credit and loan account numbers. Safety alone is worth the cost of using an escrow company to handle your real estate closings.
Many escrow companies handle other duties associated with real estate closings, including title searches and title insurance. Both of these are highly important. A title search helps ensure the title to the home is legally transferable. Title insurance is needed to protect against losses in case something is found to be faulty with the title in the future. Buyer’s don’t legally need to purchase buyer’s insurance, but if they are using a bank or other traditional lender, they will be required to purchase lender’s insurance. Many escrow companies can help with this. You could attempt a title search on your own, but do you want to risk missing something that could make the sale of the home void? It’s best to trust this task to an escrow company that includes a title search in the service.