Escrow Payments – All You Need To Know

Financial activities are one of the most streamlined practices that involve various kinds of arrangements and services. An escrow account or Escrow payment is a service or an arrangement that involves a third party to perform receiving and disbursing property and money between the main parties performing the transaction. But how does exactly that happens? Well, let’s check it out in the given blog.

What is an Escrow Account?

The simple definition of an escrow account is that it's an account where the third party has access to escrow funds or assets. These assets or funds are transferred when the obligatory party has completed the obligations. So, if party A has agreed to pay party B for organizing an event, then the Escrow account created will store the funds. These funds will be then disbursed when B completes his obligation to organize the event.

Escrow accounts are usually created in cases of housing loans and mortgages that require monthly payments. Such payments are critical as they ensure that the lender, which is a bank usually, gets the complete assurance of the payee's credibility. An Escrow account facilitates risk mitigation.

Why it is Important?

Now, you may wonder why do I need an escrow account? Well, the most important reason to attain escrow payments is that it enables the protection of transaction and avoid fraud. Though you'll have to select a very reliable person or organization, escrow payments and account arrangements add convenience to your loan logistics.

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What do you need to know about Escrow?

Before we move on to how escrow works, let’s pen down some important things about escrow.

  • Though escrow payments are for real estate, they apply to every and any situation as long as two parties are involved.
  • It’s used for home purchases as well as mortgage life.
  • There are digital escrows applicable to a variety of assets.
  • You must choose the right option to make sure your funds are in trusted hands.
Now, let’s see how escrow works. Imagine a case where you hire a contractor to renovate your home in exchange for certain funds. Now, with escrow payments, what you can do is place these funds with a third party agent at the bank. The third party will get the funds from you in the escrow account. He will release the money to the contractor only when the renovation is completed. Hence, such a contract assures both the parties i.e. the contractor and you, the house owner.

Escrow Frauds to Beware of!

Is there everything perfect with escrow? Well, with silver clouds, there is a bit of dark lining as well. In recent times, there have been cases where escrow funds were wrongly sent to fake accounts. Scammers as well as cybercriminals perform such tricks to acquire money and instantly disappear. They create a perfect scenario for escrow payments firms and provide their clients with intriguing information. So, what you need to do is find a reliable source to open your escrow account and carry out your transaction with ease.
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