Escrow

An Escrow is a legal arrangement wherein a third party temporarily holds the assets of two transacting parties and releases them when all the terms and conditions of a given contract are satisfied. Unless the terms of the agreement are not met, the assets are maintained by a third party in its account. In a transaction, using an escrow account adds additional safety for both parties.

The main goal of an escrow is to ensure that parties involved in the agreement stick to their end of the bargain. It can thus be seen as a mediator of the transaction. Escrow finds its usage mostly in real estate transactions to protect the interest of both the buyer as well as the seller during the home-buying process.

Usage of Escrow for online transactions:

When it comes to online transactions, there is very little transparency about who we are dealing with. Thus to solve this issue, there are licensed third parties who provide internet escrow services to ensure the buyer and seller’s safety. The contract terms, including the purchase amount, time for goods to arrive, and allowable return period, are agreed upon and submitted to the third party. Once these terms are fulfilled and both parties give their approval, the online escrow provider completes the transaction by sending funds to the seller.

In case there are any disagreements, a dispute resolution protocol comes into effect to ensure the fairness of the transaction. The dispute resolution protocol decides who will keep the money for the transaction. With a rise in cybercrimes, there has been an increase in bogus online services.

Are All Escrow Service Providers Trustworthy?

However, there is one word of caution with Escrow as one should always be careful while selecting these service providers to ensure that they are not someone with malicious intent.In addition to these uses, Escrow arrangements are also used in banking and mergers and acquisitions (M&A).

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