What is Escrow?

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What is Escrow?

Postby stindows » Fri Nov 23, 2018 6:46 am

It will interest you to know that not many people understand escrow’s meaning. The Balance describes escrow services as a kind of arrangement in which you use a neutral third party who is neither the buyer nor the seller to hold something of value. This thing could be money, deed, or some other valuable instruments.

You see, this third party is referred to as the escrow and they are usually neutral and disinterested in the transaction. What the escrow basically does in a transaction is to ensure no one (either buyer or seller) fail in sticking to their end of the bargain.


You’re probably wondering how this works. So, let’s shed more light on it. In every buying and selling transaction, both parties agree to do certain things. The buyer agrees to pay a particular amount at a particular time while the seller provides the “asset” or “service” being sold. As simple as it seems, not every transaction happens that way and some are somehow complicated.

In many instances, the buying party might want to inspect the goods or property before paying. The seller, on the other hand, will also want assurance that he or she would get paid the due amount. It could also be that the item being sold is a service instead of a physical product. In cases like these, both parties will have to arrive at an agreement. To reduce inherent risk and enhance safety, an escrow company, therefore, acts as the “referee” between both parties.

Escrow services are then like a middleman who acts to safeguard assets which could be money or other things, to enhance safety and ensure both sides meet up their expectations. Provided the transaction goes as agreed upon, the escrow provider then disburses the funds, document, or instrument according to the agreed terms.

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