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Guide To Escrow Services

Oct 28, 2020 - 05:53 AM Author - Alex Pardin

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Thinking about securing your transactions and opting for escrow services for this purpose? Then, you are at a perfect and correct place. This Escrow service guide will help you in exploring and knowing almost everything about escrow services.

Let’s get started!

An escrow is a deed, bond, or any other documents that are held by a third party in their custody and are executed only when certain conditions are met.

In common words; an escrow is a financial ordering and in this financial order, a third party keeps, manages, and controls the payment of funds needed by two parties participating in a transaction. Escrow helps in making transactions a lot more safe and secure by holding the money in a secure and safe escrow account which can be accessed only when certain terms and conditions of the agreement are met and are guided by the escrow company.

Escrows are very helpful in cases where a larger amount of money is concerned with the transaction and there are certain numbers of obligations and formalities that are needed to be fulfilled before making any payment. For instance, let us take up the case where a website is being built and the buyer demands a kind or confirmation or guarantee of the quality of the work done and the seller does not want to reveal such a huge part of the project without any guarantee or confirmation that the buyer will make the payment on time.

How does an escrow account work?

An escrow account works in a simple manner. It actually is a holding tank. When a real estate transaction takes place then the escrow officer- that could be a lawyer or a title company representative- takes care of and holds all the mandatory documents and deposits. And the buyer and seller carry out their transactions.

In easy language, an escrow decreases or eliminates the risk of a hoax by performing its duties as a trustworthy third- party such as collecting, holding, and paying out funds by making the seller and buyer satisfied

  • Agreement of buyer and seller on terms of the transaction is what is needed most for an escrow to work efficiently. So before proceeding with any transaction both must agree to the terms and conditions of the transactions.

  • The payment has to be made by the buyer through an approved and legal payment method to the secure escrow account. Then the procedure follows a careful verification of funds and then the seller gets acquainted that the funds have been secured in the escrow.

  • Once the payment has been verified, then the seller ships the merchandise to the buyer and must notify the buyer with the tracking information. And then it has to be verified that the buyer has successfully received the merchandise.

  • When the buyer has received the merchandise, then he is given a number of days to inspect and analyze the products in order to ensure that the buyer has sent the perfect and correct merchandise. He has options to accept or reject the merchandise.

  • And when the buyer accepts the goods then the seller gets paid fairly through the escrow account.

Benefits of an escrow account

An escrow account has many benefits. A few of them are listed below:

  • Escrow accounts provide a lot of conveniences. An escrow account holder does not have to worry or bother about due dates.

  • An escrow account can help you in getting low credit rates in banks. So having an escrow account is helpful in getting credit

  • Having an escrow account is good for the buyer as the seller is paid only if the buyer inspects and accepts the merchandise.

  • An escrow account also benefits the seller as the seller is asked to ship the goods only when the funds provided by the buyer are verified and authorized.

  • Shipping and exporting goods are full of risks and uncertainties but escrow accounts can help in decreasing or eliminating these risks.

  • The funds involved in a transaction where escrow accounts are associated are completely safeguarded and secure.

How to choose a perfect escrow agent for you?

Escrow services are all about building a bond or a relationship in business. Your agent will most probably suggest an escrow agent with whom he or she has worked earlier and is known to his or her work record. But still, there are many important factors that one should consider before bringing an escrow officer to his business. Important factors such as the experience of the escrow officer, the stability and financial strength of the company, and the fee for escrow services are very essential while choosing the most appropriate escrow agent for you. For your convenience and time saving, try finding an office near you.

Fees of escrow services vary from agent to agent. So it has been advised to compare different prices and services and then select the best.

You may follow the below-mentioned procedure for this:

  • One must go for asking a list of escrow costs and titles and must ensure that it is provided by the lender too while purchasing.

  • Identify if the buyer or the seller pays the fees.

  • If the initial offer is low, then go for looking at incidental fees such as wire transfers, courier fees, and fax fees, and copying. And these fees must be revealed on one’s initial estimate of fees.

But one has to keep in mind to opt for only Title Company. A title company is what one can trust and rely on. And moreover, a Title company is much aware of all the hindrances such as liens, forgeries, property taxes, judgments, and a lot more that must be cleared and handled before proceeding further for any deal. Once the title company has judged and has considered the title clear, then it goes for issuing an insurance policy, namely a title policy, with the aim of protecting and securing the buyer and seller from any disputes or claims that may incur in the future.

Types of escrows

Escrows are of the following types:

  • Real estate investments

  • Open offer escrow

  • Business transfer arrangements

  • Escrow bankers for Reverse book build issues (De-listing open offers)

  • Acquisition of a controlling stake in Private Limited companies

  • Escrow Collection bankers for initials public offer (Book-build IPO)

  • Trust and retention escrow accounts

What are the duties of an escrow agent?


As mentioned above,
escrow services are all about a neutral third- party agent that holds and controls specified documents needed for a healthy transaction and executes those documents only when certain terms and conditions are met by the seller as well by the buyer.

The duties of a good escrow agent do not end here only. He even manages and looks after all the financing, title and escrow things, transaction instruction, and all the other paperwork associated with the mortgage refinance, home purchase, and other title transfer that he must do in order to enable a smooth transaction.

Escrow agent’s chief duties also incorporate protecting and safeguarding the required documents, securing the process, and checking if everything is secured or not, and ensuring that the document's needs are filled timely.

However, an escrow officer does not advise its buyers. But if the closing process is taking plenty of time, then you may have to approach the escrow officer in order to check if there is anything that can assist in quickening the process. Then an Escrow officer may look for the options available and may help you in speeding up the procedure.

Escrow account fees


There are some associated with the escrow account. Fees for availing escrow services vary differently. But commonly, an escrow agent will demand 1% of the home sales price for managing and controlling the escrow account. And this fee has to be paid at the time of home sale closing. It is on the home seller and the home buyer to pay the fee. One can even negotiate the fee to the other one or they can go for winding up by splitting the bill.

Once the home has been sold out, then the fresh homeowner has to ensure that his or her escrow account has enough amounts to pay out the homeowner’s insurance payments and property taxes. The homeowner must ensure that the mortgage lender makes the required payments directly and on a timely basis.