Escrow essentially is a financial process in which a third party holds assets or funds on behalf of two or more parties involved in a transaction. They keep this fund till the ultimate realization of the relevant contractual obligations that have been pre-arranged.
Even though an escrow system is extremely beneficial for both the buyers and the sellers, it also is subject to several misconceptions. Due to many popular myths associated with the process, a lot of individuals fail to understand how it works.
The following pointers debunk some of the significant escrow myths with facts:
● Myth: Escrow is only meant for real estate
Fact: While escrow services are popular in the realm of real estate, especially when it comes to highly valued properties, their use is much wider than that. One can seek out escrow services to facilitate transactions associated with law, banking, and even trade. The trend of using escrow for international trade is becoming popular with every passing day. This system helps reduce the non-payment risks associated with overseas trade to a good extent, providing exporters with the assurance that they shall get their deserving payments as soon as their goods are delivered as per the conditions of their relevant agreements.
● Myths: Only banks can have escrow accounts
Fact: Before debunking this statement, you must understand what is escrow account in a bank. In most cases, banks provide escrow services for cash and Demat or share transactions. But they can also use these accounts for a variety of other purposes like mentioned above, such as goods trade, real estate, and so on. Now coming to the myth, other than banks, there are several other financial institutions available today that offer reliable escrow services.
● Myth: Escrow agents are like attorneys
Fact: In the financial arrangement of escrow, a third party is responsible for holding assets or funds. Typically, you shall be assigned an agent who shall be responsible for overseeing the third-party account linked with your transaction.
However, this agent shall not work as an attorney. While attorneys always speak in favor of their clients, escrow agents have the responsibility to be impartial and fair at all times. However, they would keep you updated on the process of your transaction.
● Myth: Escrow is applicable to only high-value transaction
Fact: Even though most escrow transactions do have high value, it doesn't mean that you cannot use them for low-value transactions.
Regardless of the money involved, this system focuses more on the satisfaction of all parties linked with it.
● Myth: Escrow is expensive
Fact: No, escrow is not very expensive at all. Usually, it involves quite a nominal fee. To accurately know how much is escrow fee; you can visit the website of any company offering such services such as Tazapay.
