“Escrow” refers to a method in which big payments for things like houses, deeds, and other securities are processed.
Essentially, being ‘in escrow’ means that a payment is temporarily held by a safe third party until it has been determined that the seller has fulfilled their end of the bargain. It is a simple way to keep large scale transactions safe and ensure that neither party loses money if the deal doesn’t work out.
This guide to the basics of escrow will tell you a little more and help you get to grips with what it might mean for you.
The Classic Example
So, the best example of being in escrow is if you were to buy a house. You wouldn’t pay the sum directly to the seller (or at least, they wouldn’t receive it right away). It would be paid into a secure escrow holding account until all of the paperwork and supplementary fees have been paid on both sides of the arrangement.
When the process is fully complete, the escrow agent (manager of the account) releases the sum to the seller and the deal is closed. In some countries, they use a similar rule to protect rental deposits. A deposit is paid at the beginning of the rental term, but it doesn’t go directly to the landlord. Instead, it sits in a holding account, until the lease is expired or terminated.
This ensures that the landlord can’t spend the deposit and then refuse to return it when the tenant wants to leave. It is similar to escrow but on a smaller scale. The service itself has to be provided by a company that is not affiliated with either yourself or the seller. Otherwise, the whole point of escrow would be moot.
The third party can’t have any stake in who the money is eventually released to.
Deciding to Waive Escrow
It is also possible to waive escrow if it doesn’t suit your situation or you want to speed up a sale. This is the most common reason why people reject it; they’re buying a house and they want to move in as quickly as possible. There are fees required to do this, however, so it isn’t usually the best option.
It is also important to understand that escrow is a secure method of transaction. It is designed to protect the interests of both parties, but particularly the buyer. It isn’t every day that a person hands over the huge sum of money needed to purchase a property and it shouldn’t be done as casually as you might buy a new suit.
Escrow is a robust and secure form of financial protection. It ensures that you never do your bit and pay your fees, only to receive less than what you were promised. It does mean that transactions take a little longer to be processed, but the extra security is worth the wait. Use reputable and professional corporate advisors to help you along the process
Always take the correct professional advice before undertaking any legal agreement