If you wonder about the meaning of an escrow account then you should read on. An escrow account refers to an account which belongs to a broker according to the license law provisions for keeping the funds representing broker’s principal or any other company or person until a transaction gets finished. Escrow account also refers to a trust account which is opened on the name of a borrower for paying his obligations like insurance premiums and taxes on property. In the United States, Escrow is mostly related to real estate. Most of the Escrow companies serve the purpose of transferring highly valued business and personal property like internet websites and businesses.
In United Kingdom, an Escrow account is commonly used for carrying on transactions of private property for holding the money of solicitor’s client; till the time the transaction gets over. In judicial context, one may also find use of Escrow. There may be some cash settlements related to environment enforcement action or class action; where money is distributed through Escrow accounts. It saves the defendant from bearing the responsibility of distributing the judgment money for court instructed use of specific plaintiffs.
The complete amount of judgment is paid by the defendant to appointed escrow or court administered escrow account and the money is distributed by the fund. The Payment Service Directives of the EU has introduced cheap online escrow services which have been licensed and regulated by the Government. Vending equipment and automated banking also makes use of Escrow. The best example of this is ATM (Automated Teller Machines) and the system which let these machines have the money saved by different customers in a separate manner and returning back the money in case a customer tries to challenge the counting result.
Vending machines are another example of use of escrow. Vending machines keep the money of a customer separately in an escrow area which remains pending till the transaction gets over. In case there is a problem, the customer needs to press the refund button. This way coins get returned from Escrow. The coins fall in to the vault in case there occurs no problem. People who are interested in Escrow should also get knowledge about escrow instructions. They are documents in writing which are signed by parties involved. Name of escrow account holder, date of beginning and end of escrow, conditions for ending an escrow etc. are some of the escrow instructions.
Kamal Hasa says
Very useful guide. Escrow comes in handy while dealing with buying and selling of big sites.
It’s safe and secure though the fees are high..
I am shocked to see above comment :D, escrow is something which is there in USA and basically used for mortgages and an account for making insurance and taxes payment.