Escrowagent

In plain words

An escrow agent is an independent third party that holds the buyer’s money until the seller has met the conditions of the deal. Put simply: the money is no longer with the buyer but not yet with the seller — it sits with a neutral holder and goes out only once the obligations have been fulfilled.

The arrangement protects both parties at once. The buyer does not transfer a large sum blind and can see that the money is reserved. The seller knows that the payment is real and does not depend on the buyer’s mood. A bank, a licensed lawyer, a notary or a specialised company may act as escrow agent — depending on the country and the type of deal.

The most important thing in such an arrangement is the wording. The conditions for releasing the money must be set out as specifically as possible: which document, from whom, by what date constitutes the grounds for payment. Vague wording such as “after completion of the deal” turns protection into a source of dispute. The status and licence of the agent itself are checked separately.

When an escrow agent is needed

What is checked in the arrangement

How escrow works

1. 01Agreeing the terms of the deal
2. 02Transferring the money to the agent
3. 03The seller meets the conditions
4. 04Checking the documents
5. 05Releasing the money to the seller

What you need to know

• The agent must be independent of both parties
• The funds are held separately from the agent’s own money
• The conditions for release are fixed in writing and specifically
• The agent’s fee is agreed in advance
• The procedure for refunding the buyer is also set out

Common mistakes

• ✕Agreeing to an agent proposed only by the seller
• ✕Vague conditions for releasing the money in the contract
• ✕Not checking the agent’s licence and status
• ✕Not setting out what happens if the deal falls through
• ✕Transferring money before the escrow agreement is signed

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