Title insurance and escrow are the parts of a purchase buyers understand least, partly because they are explained in language designed by lawyers. Here is the plain version.
What title insurance is for
Every other insurance policy you own protects against something that might happen in the future. Title insurance protects against something that already happened in the past and has not been discovered yet.
Real examples: a previous owner’s divorce where the deed was never properly handled. An unpaid contractor who filed a lien. An heir nobody knew about with a claim on the property. A forged signature three owners back. A recording error at the county.
Before closing, the title company searches the public record and issues a preliminary report listing what it found and what it will not cover. Then it insures the rest.
Read the preliminary report
Most buyers do not. It is dry, and it matters.
The report lists the easements, covenants and restrictions attached to the property. That is where you find out the utility has the right to dig across your back garden, the neighbour has a recorded right to use your driveway, or the HOA restricts what you can park where. None of these are necessarily problems. All of them are better known before closing than after.
Ask us about anything you do not understand on it. That is part of what we are for.
Why there are two policies
The lender’s policy protects the lender for the amount of the loan. Your lender will require it and you will generally pay for it. It protects them, not you.
The owner’s policy protects you, for your purchase price. It is usually a one-time premium at closing and lasts as long as you own the property.
Who customarily pays for the owner’s policy varies, and in Washington it is frequently a seller expense — but it is negotiable and local custom is not a rule. Make sure someone is buying it. A lender’s policy alone leaves you unprotected.
What escrow does
Escrow is the neutral third party holding the money and the documents, releasing them only when every condition has been met. Nobody has to trust anybody else; they both trust the process.
The escrow officer collects your funds and the lender’s funds, prepares the settlement statement, makes sure the seller’s existing loan is paid off, records the deed with the county, and distributes the proceeds. Washington transactions typically close through escrow this way.
Important: the escrow officer is neutral. They work for the transaction, not for you. They cannot advise you on whether a term is a good idea. That is our job.
A warning worth taking seriously
Wire fraud in real estate is common and devastating. Criminals monitor email around closings and send convincing instructions to redirect your funds. The money is usually unrecoverable.
Never accept wiring instructions by email. Call the escrow company on a number you independently looked up — not one from the email — and verbally confirm every digit before sending anything. If instructions change at the last minute, treat that as fraud until proven otherwise.