An escrow account, also called a trust or deposit account in custody or in guarantee, is a procedure that is used in a sale to ensure that the payment reaches to the seller and that the product or service does the same with the buyer. That is achieved because the operation cost is delivered in the first instance to another part of the deal, called escrow agent, instead of paying it directly to the seller. Commonly, the money is not moved to the seller’s account until the product or service reaches to the buyer properly.
On one hand, to sign an escrow contract is the ideal formula for both the own private sellers and for the company, because it guarantees the payment. Also, last minute changes are avoided, because the price is already settled in the escrow account and it can’t change. On the other hand, the buyer knows that if he doesn’t get what he or she has payed, his/ her money will be returned.
The escrow contract, a method that is common to be used in the English-speaking countries and that is spreading throughout Europe really quickly, has several possible uses and is nowadays one of the 8 best ways of payment. We will now explain and review which each one consists of:
Escrow account for Online Shopping
Thanks to an API escrow, like Marketpay’s, the payments for some of Marketplace products can be done with a deposit custody account. In this way, it is guaranteed that the product will be delivered properly and that it will be charged whenever the buyer receives it.
Escrow account for purchases among individuals at a distance
There are many doubts when two foreign people want to exchange a product for money, starting in knowing who is the one to takes the first step. Using a contract escrow avoids any possibility of fraud, because if one of them backs down or disappears, the other one receives what he progressed.
Escrow account in real state law
In leasing operations, escrow accounts also plays a big role. For example, if you have to make payments on a regular basis, an escrow agent can take care of making them the day that it has to be done. Also, when you use escrow method with the individual or the leasing agent, you avoid sudden contract changes. This video is a good example of how escrow works in real state sector:
Escrow account in computer services (IT service)
It is common that an escrow account in a company that develops software for clientes. In this case, what is in the deposit is a copy of the source code that they are working on. So, in case that the developers disappear, the company can still access to the source code and continue with the use of the programs.
Escrow account in the sale of companies
When there are some high amounts of money, it is left a percentage of the total price in an escrow account for a period of time as a guarantee that the clients or suppliers don’t carry out any claim.