Escrow Fraud & Title Insurance in Pennsylvania
- Buchanan
- 3 days ago
- 7 min read
Real Risks, What’s Covered, and How to Protect Your Closing
Buying a home should feel exciting, not risky! Recent stories from Pennsylvania about mishandling escrow funds during closings may have you wondering how to protect yourself. The truth is simple.
When you understand how escrow works, what title insurance does and does not cover, and which safeguards to insist on, you can walk into closing feeling calm and confident.
This guide explains the red flags to watch for, the fine print many buyers forget to check, and a step-by-step checklist that keeps your money and your deed safe. We will also show how a trusted local team in Pennsylvania can make your closing smooth from start to finish.
What is Escrow, and Why Does It Matter?
During a home purchase, your settlement agent holds money in an escrow account for a short period.
Those funds pay off the seller’s old mortgage, clear property taxes, and settle any other obligations before ownership transfers to you. In a well-run closing, every dollar is tracked, documented, and sent to the right place at the right time.
If funds are misapplied or stolen, you can inherit unpaid liens, surprise debts, or clouded ownership. That is why escrow is not just a formality. Escrow is essential for ensuring a safe closing.
Where Title Insurance Fits and Where It Stops?
Title insurance protects you from past problems tied to the property’s title. Examples include old liens that were never released, recording mistakes, or undisclosed heirs. This protection continues long after you close. It is one of the smartest purchases you will make during a transaction.
However, title insurance does not cover every situation. Operational mistakes during the closing, such as escrow misuse, a payoff sent to the wrong account, or settlement instructions that are not followed, are often excluded from coverage. The best protection is a combination of strong escrow processes and the right policy. Together, they help prevent loss and also help you recover if a past issue with the title appears later.
The Difference Between Internal and External Scams
There are internal and external scams.
Internal escrow scams could be anyone linked to the escrow account within the title company or that has access to the processes of handling the money. Internal escrow scams result from a person who had access to the escrow account such as an employee, partner, or contractor. The person who is authorized to access the funds in this case steals or misuses the money directly from the account.
External scams, such as wire fraud, usually involve deception, hacking, or impersonation to redirect payments—most often through fake wire instructions or phishing schemes. External scams result from scammers who may use tactics such as email spoofing, hacking, fake notifications or emails, phishing, and impersonation calls and/or text messages. These scams are from people who are trying to get information they can use to gain access to your account and/or to have you wire or send money to them. They can pose as fake escrow companies to mimic a legitimate service.
Warning Signs
Despite the difference in internal and external scams, being alert and aware of potential scams helps you discern what is a real, legitimate, helpful company and what companies are potentially run by scammers.
Here are some warning signs to look for and you will want to avoid hiring a settlement company and/or wiring any money if any of the following situations occur:
Internal Escrow Fraud Warning Signs:
Unexplained Delays or Unclear Information - The process includes unexplained delays and unclear information about when funds will be disbursed or received.
Incomplete Documentation - The system lacks complete documentation because it does not receive payoff statements and receipts and wire confirmation records.
Differing Records - The actual fund distribution records differ from the statements found in closing reports.
Refusal or Delay in Receiving Proof - The request for escrow ledgers, invoices and payment proof remains unfulfilled by the party.
Inconsistent or Unusual Schedule of Fund Transfers - The system monitors all fund transfer and withdrawal activities which take place during times that differ from the established schedule.
Commingling Accounts - Commingling of accounts, where escrow funds are mixed with company operating funds.
Staff Turnover - Sudden staff turnover or an employee avoiding questions about specific transactions.
No Review or Dual Authorization - Lack of independent review or dual authorization for releasing escrow funds.
Outdated or Missing Licensing Information - The company needs to show proof of valid licenses and bonding and maintain good standing with the Department of Banking or Insurance from your state.
Poor or Inconsistent Online Reviews - Multiple complaints about delayed closings, missing funds, or unresponsive communication can be a major red flag.
Unverifiable Business Details - You need to exercise caution when you cannot find a valid office address or website or staff directory or when contact information does not match official records.
Pressure to Skip Verification Steps - Ethical escrow agents promote open communication through documented processes instead of taking any illegal paths.
External Fraud Warning Signs
If you think the company you are considering hiring is a scam business, here are some warning signs to look for:
Last-minute changes to wiring instructions. Wire details rarely change once issued. Any “updated” instructions sent close to closing should raise immediate concern.
Unfamiliar or personal bank accounts. Legitimate title companies and lenders conduct business through accounts which have been properly verified.
Emails with slight spelling errors or domain variations. Scammers create email addresses which resemble the real ones by using small variations in their domain names (e.g. @gmai1.com instead of @gmail.com).
Urgent or high-pressure messages. The use of phrases such as “transfer immediately” and “funds needed today” serves to create an urgent situation which forces people into quick decisions.
Emails or attachments requesting personal or banking information. Reputable companies will never ask for sensitive data through unsecured email.
Inconsistent communication tone or formatting. If the message style suddenly differs from previous correspondence, double-check if it is legitimate or not. There may be multiple scammers handling the communication and/or they get sloppy in their communication. It’s important to stay alert.
Phone calls or texts from unknown numbers claiming to confirm or change payment details. You should always check instructions through a phone number which you know is reliable.
Missing or vague wire confirmations after sending funds. Your settlement company must provide direct transaction confirmation which you need to verify for all transactions.
Spoofed websites or portals. Fraudsters create deceptive websites which mimic official title company interfaces so users must verify the URL address before attempting to access their accounts.
Requests to “test” or send small transfers first. Scammers sometimes start with small trial amounts before attempting to steal the full payment to be sure the payment would go through the bank account without hassle.
Prevention Tips
Choose a licensed and bonded title or settlement company who conducts regular audits of escrow accounts.
Request dual authorization for any fund disbursements. Request for two verified signers for every transaction.
Ask whether the company undergoes independent audits of segregated trust accounts. This is a practice that provides regulatory compliance and financial integrity between the company and the client.
Review your final settlement statement and verify all payoffs were made to the correct recipients.
Work only with companies that use secure, insured escrow accounts and adhere to American Land Title Association (ALTA) Best Practices.
What to Do if You Suspect an Internal Escrow Scam
If you believe your escrow funds were mishandled or stolen:
Notify your title company’s management immediately.
Contact your bank to request a temporary hold or reversal if possible.
Gather all documentation—emails, wiring confirmations, receipts, and communications.
File a report with your state’s Department of Banking or Insurance Division, and consider contacting local law enforcement.
What to Do if You Suspect Wire Fraud
Call your bank immediately and request a fraud wire recall or hold.
Notify your settlement agent and your title insurance underwriter.
Save every record, including emails, texts, instructions, and call logs.
Contact local law enforcement and file reports with the appropriate authorities.
This information is general and not legal advice. If you believe you are a victim of fraud, speak with an attorney as soon as possible.
Your Due Diligence Checklist Before You Hire an Escrow Company
☐ Verify the company’s legitimacy and licensing information
☐ Research the company’s reputation
☐ Ask about dual authorization, audited accounts, secure portals or encrypted email communications, and that the company performs background checks of their employees
☐ Review the company’s policies and procedures
☐ Confirm underwriter and legal oversight
Why a Trusted Local Team Makes a Real Difference
A significant policy matters. A great process matters just as much. A reputable, local title company gives you both. You get tighter escrow controls, more transparent communication, and people you can meet in person. If a question comes up, you will not be left guessing.
Buchanan Settlement Services focuses on the two layers of protection that keep you safe:
Attorney-supported closings that keep instructions clear and documented
Secure escrow management with verified disbursements and written payoffs
Comprehensive title and lien searches that uncover hidden risks
Guidance on what your policy covers and what it does not
Local expertise with offices in Waynesboro and Chambersburg
If you want to learn more about coverage basics, start with our guide to title insurance in Pennsylvania. For a step-by-step look at our process, visit attorney-supported settlements and escrow. We have designed these internal resources to provide concise answers to fundamental questions.
A Simple Plan for a Smooth, Stress-Free Closing
Collect your trusted contacts early. Save the direct phone numbers for your lender, settlement agent, and real estate agent.
Decide how you will verify wire instructions. Agree on a phone verification routine before any money moves.
Ask for a written checklist and timeline. Know what to expect and when to expect it.
Request a plain-English policy walkthrough. Ten minutes now can prevent weeks of stress later.
Pause if anything feels off. A quick call can protect a lifetime of savings.
Frequently Asked Questions - Escrow Fraud
Does title insurance cover escrow theft?
Usually no. Title insurance handles title defects from the past. Escrow misuse is a process failure, so you need strong controls to prevent it.
Do I still need title insurance if I trust my settlement agent?
Yes. Process controls prevent many issues, but title insurance protects you from hidden issues that no one can see in advance.
Ready to Close with Confidence?
Call (717) 762-1415 or contact us to schedule your closing. Buchanan Settlement Services provides attorney-supported closings, secure escrow management, and tailored title insurance in Pennsylvania.
Our goal is simple. We want you to protect your investment from contract to keys.
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