Escrow

From ArticleWorld

Escrow has been defined as the holding of funds, documents, securities, or other property by an impartial third party for the other two participants in a business transaction. When the transaction is completed, this third person, called the escrow agent, releases the entrusted property. The word escrow has its root in the Middle English word escrowl or scroll.

Increasing importance

In many jurisdictions, escrow agents epitomize a separate profession with its own training and authorization needs. In other jurisdictions like Canada, escrow functions are carried out by lawyers. In both cases the whole process is marked by pertinent rules and protection through the use of licensing and/or bonding.

Escrow is most commonly associated with real estate transactions. When a home or property changes hands, the seller of the property transfers the property title to the escrow agent. The buyers too transfer the funds themselves or charge a bank to transfer mortgage proceeds to the escrow agent. When all conditions of the purchase agreement are met, the escrow agent assigns the property title to the purchaser and distributes the funds to the seller. In fact in some jurisdictions estate agents are themselves permitted to act as escrow agents.

Going digital

In this modern age, escrow services have become digital. Many online businesses permit buyers and sellers who are geographically remote to buy goods and services from each other. Even employers and employees communicate through the internet via an escrow agent to give and follow instructions. This has also led to fraudulent operators setting up fictitious escrow services. Therefore, it has become important that people using such services proceed with caution.

Escrow may also be used to exchange non-tangible goods like software or industrial designs.