Closings run through an escrow or title agent holding funds and documents subject to instructions.
Duties. Strictly limited to the instructions. The agent is not an advocate for either side and has no duty to advise on the transaction’s merits, though several jurisdictions impose a duty to disclose known fraud.
Instructions. Written, signed by both parties, specifying the conditions for release and what happens if they are not met. Conflicting instructions paralyse the agent, whose remedy is interpleader.
Good funds. State laws require collected funds before disbursement, with defined categories. Disbursing against uncollected funds is where agent losses occur.
Wire fraud. Fraudulent instructions redirecting closing proceeds are the dominant loss in this area. Controls: verification of wire instructions by telephone to a previously verified number, no acceptance of changed instructions by email, and warnings to all parties at engagement.
Closing protection letters from the underwriter indemnifying the lender and in some states the buyer against the agent’s fraud or failure to follow instructions. Obtain one; it is the practical remedy when an agent misappropriates.
Recording. The agent’s obligation to record promptly, and gap coverage for the interval between closing and recording.