Escrow
When buying expensive items, consider using an ESCROW account to complete the transaction. Escrow will hold your payment and not transfer it to the seller until you receive the goods, and inspect their quality and their compliance with terms of order. Escrow's commission typically add up to less than 6% of the purchase price. Buyers and sellers often split the fee.
What is Escrow?
Very simply defined, an escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event.
Why Do I Need an Escrow?
Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are in the possession of the escrow holder, and to disburse funds and/or convey title only when all provisions of the escrow have been complied with.
How Does Escrow Work?
1. Buyer and Seller Agree to Terms
Both parties agree to terms of the transaction, which includes a description of the merchandise, sale price, number of days for the Buyer's inspection, and any shipping information.
2. Buyer Deposits the Payment with Escrow
The Buyer submits a payment; Escrow company verifies the payment.
3. Seller Ships Merchandise
Upon payment verification, the Seller is authorized to ship merchandise and submit tracking information. Escrow verifies that the Buyer receives the shipment.
4. Buyer Accepts the Merchandise
The Buyer has a set number of days for an inspection and the option to accept or reject the merchandise.
5. Escrow Pays the Seller
Once the Buyer confirms receiving the goods in good condition Escrow transfers the pament to the Seller. The transaction is completed.
Escrow Advantages
- Buyers and Sellers Know What to Expect: The buyer and seller view and agree to terms before the transaction begins.
- Payments are Guaranteed: Instead of sending payment directly to the seller, the buyer sends payment to Escrow where it is held in a trust account.
- Shipments are Safe: The seller may feel safe when shipping the merchandise to the buyer, knowing that the buyer's payment has been verified and is safely held by Escrow.
- Inspect Before You Pay: If the buyer and seller agree to an inspection period, the buyer may examine the merchandise before payment is released to the seller (and if the buyer rejects the merchandise, the seller may inspect the merchandise upon return before payment is refunded to the buyer).
