There is a common situation whereby you are doing a very important transaction, and in the process you are wondering if you can trust the person on the other end. This mostly happens when you do not know or you have never met the person you are doing business with. Understanding what Escrow service is, can help you minimize the risks, build trust and carry on with your transaction more comfortably. Learning what Escrow service is all about and how it works, is worth the struggle whether you are dealing with an online transaction or a real estate sale.
What is an Escrow?
An escrow is a legal concept whereby a third party holds financial instruments or assets and regulates the funds required for the two parties involved in a given transaction. Escrow ensures security of a transaction by keeping the payments in an escrow account and releases the payments only when all the terms and conditions of an agreement are met. The payments can be inform of fiat currencies or cryptocurrencies.
Escrows are extremely important in the case of a transaction involving large amounts of money or where the transacting parties do not trust each other. In such cases, certain commitments must be fulfilled before any payment is released to the seller. For instance, in case of article writing, the buyer might demand to know the quality of work before making any payments, and on the other hand, the writer (who is the seller) does not want to do a lot of writing without being assured that he or she will be paid. Initially, escrow services were difficult and were to be obtained through lawyers and banks, but nowadays there are multiple institutions, service providers and even individuals that provide escrow services online at low prices. www.escrow.com, www.payoneer.com are some of the reputable escrow service providers online. Payments done through escrow are safe with minimum risks of fraud or money loss. As a result of using escrow, there is elimination of all legal jargons, improved security while transacting and increased confidence in parties involved.
How Escrow works
Escrow act as a third party during transactions. That is, they collect, hold and release payments only when the parties involved are fully satisfied. By doing so, they minimize the risks of fraud and increase security during a transaction. Below is a step-by-step explanation on how escrow works.
- Buyer and seller agree to terms: in a normal scenario, a buyer or a seller has to begin a transaction. All parties agree to the terms of the transaction and register with an escrow service provider of their choice.
- Buyer pays the chosen escrow provider: once the buyer and the seller agree to a payment method, the buyer submits the payment to the secured Escrow account. The escrow provider verifies the payment and the seller is immediately notified that the money has been secured In Escrow.
- Seller sends goods/provides service to buyer: after the seller has verified the payments, he or she is then required to send the goods/provide services and submit tracking information to the buyer then verifies that the buyer has received the goods/services.
- Buyer accepts the sent goods/services from the seller: the buyer is given a number of days to thoroughly inspect the goods/services and verify whether they are of the quality he or she wanted. After inspection, the buyer can either accept or reject the merchandise/service.
- Escrow pays the seller: if the buyer accepts the goods, escrow service provider releases the payment to the seller from the Escrow account and the transaction is complete-safely and securely. If the buyer does not accept the goods/services, the payments are held in escrow until both parties fulfill the requirements signed in the agreement.
It is important to note that the escrow service provider usually provides updates that let you know exactly the stage that the transaction process is in and if there is any action required from your end. Whether you are a buyer or a seller, it is hard to be stuck wondering where you are in your transaction as long as you have the access to the above systematic guidelines.
Notably, escrow fees vary depending on which state you are in. in some cases buyers pay the charges while in some others, sellers pay or both. Escrow services generally cost between 1-2% of the home price.