If you’ve ever purchased a home – or even looked into the process behind purchasing a home – you’ve probably seen the term ‘escrow’ quite a bit. In the most basic layman’s terms, an escrow account is simply a bank account overseen by a neutral third party; usually associated with high-value purchases.
But escrow accounts aren’t unique to real estate. These types of accounts can be useful for anyone looking to maintain accountability between two parties in ANY high-value transaction.
For example, say you were looking to purchase a classic car or a boat for your family vacations. Once you’ve located the pre-owned vehicle you want, you now are stuck dealing with a relative stranger for a purchase north of $10,000. How do you hold the seller accountable and ensure that you don’t fall victim to an online scam? Often online escrow accounts help to fill that gray area between a buyer and seller who are unknown to each other.
How Escrow Works
As a neutral third party, the escrow company works to keep honest people honest and ensure that both parties can complete the transaction with much greater confidence than a money order or personal check. The buyer can transfer in the funds for the purchase knowing that it will be held in trust until they give the green light. The seller knows that the funds are available as soon as they provide the vehicle or goods to the buyer. The escrow company also has the ability to release partial funds to help with things like transportation or repair costs prior to the buyer receiving their purchase.
All in all, escrow accounts have greater use than real estate transactions. Anytime there are buyers and sellers looking for an extra layer of security in their deals, online escrow accounts are a great place to start.
Have you ever used an online escrow company outside of real estate purchases? What did you find beneficial or difficult?