What Is An Escrow Service?

What is an escrow service? An escrow service is the third party between the buyer and the seller. An escrow service is a vehicle. You take something into position, and when the articles of the agreement...

An escrow service is a vehicle. You take something into position, and when the articles of the agreement are met, you give it up. An example would be if you are purchasing something and you put down a deposit of $5000. An escrow officer will hold it until the closing, and then give you the $5000. Say you are having a swimming pool put in your backyard. You decide that you are going to pay the swimming pool company in three rows of $10,000 each. The swimming pool company is required to do a certain amount of work each time the money is given. You will not give them the money until all obligations are met. This is what an escrow service does.

Title companies are escrow officers. Lenders can be escrow officers. Attorneys can be escrow officers. To become an escrow officer, you have to set up a bank account, which called an escrow account, where only other people's money goes. There are set terms and conditions in order to take the money in and take the money out.

Just like anything else, escrow fraud can happen. Escrow fraud mostly happens through defalcation. This means that somebody other than the two parties involved in the escrow agreement uses the money. Let's say you give an escrow company $20,000 and they are supposed to hold on to it until the roof is put on. The title company, the escrow agent, or the attorney uses that money. That is escrow fraud. You are not allowed to do that. It is a felony offense.

However, you are protected against escrow fraud. The escrow company carries its own insurance. Of course, you would want to make sure you do business with an escrow company that you trust. You would also want to make sure that the terms and conditions of the escrow agreement are put in writing and signed by everybody.

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