11 Important Terms to Know for Escrow Transactions
Are you looking to turn to escrow payment solutions for your online and social media transactions? If yes, you must familiarize yourself with crucial terms for seamless escrow transactions.
The increase in online vendor scams and their negative impact on businesses have raised the need for buyers and sellers who prefer e-commerce transactions to use escrow for smooth transactions. However, understanding the terms associated with escrow transactions is vital for all parties to work out a favorable, seamless arrangement.
11 Crucial Terms You Must Know for Your Escrow Transactions
Escrow is a legal arrangement where a third party (the escrow agent) holds and regulates the payment of funds and properties until the transacting parties meet all contract conditions. When people want to buy or sell something to people, they don’t know, or when huge amounts are involved, and trust becomes doubtful, escrow is the easiest option for the transacting parties. It makes transactions between strangers seamless, as every form of distrust is eliminated.
For example, to avoid scams from online social media vendors, people can resort to escrow services to ensure the safe delivery of whatever goods they buy. Their money is held safely in escrow until the vendor successfully delivers the item ordered.
The escrow agent is the neutral third party, usually a company or an attorney, involved in an escrow transaction. They manage the escrow process and ensure all parties fulfill the terms of the arrangement. Peppa.io is a typical escrow agent in Nigeria, with others like Vahlid, PayScrow, Vesicash, etc.
Transacting parties are the key participants in an escrow transaction. That is, the buyer and the seller involved in the transaction. The buyer is the party purchasing a product, service, or property and usually initiates the escrow transaction. Conversely, the seller is the party selling a product, service, or property in an escrow transaction.
Escrow Transaction ID
The escrow transaction ID is a unique identification code generated by the escrow agent platform to enable the parties involved to track the transaction’s status. In the event of multiple transactions between the same parties, the transaction ID makes it easy for them to log complaints and resolve issues quickly.
Held in Escrow
The term “held in escrow” describes that the funds or properties to be exchanged in the transaction are held by the escrow agent and won’t be released until the arranged terms are fulfilled. An escrow transaction can’t be said to be completed when one party has not received its funds or goods purchased.
The escrow agreement, or service level agreement (SLA), is a binding contract outlining the terms and conditions of the escrow arrangement, such as the responsibilities of the buyer, the seller, and the escrow agent. It also includes the transaction duration, the payment disbursement frequency for milestone transactions, and other key terms and conditions vital to the transaction’s success.
The transacting parties must agree to the terms and conditions of the escrow agreement before the transaction can take place.
A title search is a verification process by the escrow agent on the ownership and legal status of a property held in escrow. This is done to confirm that the seller of the goods or property in escrow has the right to sell them to another party. However, it’s most common when large items or real estate properties are involved in the transaction.
Accepted delivery is a term used to denote that the buyer has taken delivery of the goods or services and given approval for the funds to be released to the seller.
Similarly, rejected delivery is a situation where the buyer refuses to accept the delivery of the goods or services delivered by the seller. This happens when there’s a discrepancy in the order or the goods don’t meet the buyer’s expectations.
The inspection period is the duration after an item is delivered when the buyer exercises their rights to inspect the item to ensure it meets their expectations. The inspection duration is usually agreed upon by all parties and stated clearly in the escrow agreement.
The purpose of the inspection period is to allow the buyer to verify the claims made by the seller during negotiations. If the seller delivers below expectations, the buyer can renegotiate terms, demand discounts, or reject the goods or services based on the escrow agreement.
This term describes the level of authorization the escrow agent needs to have before releasing the funds held in escrow to either the buyer or the seller. The two key parties involved in the transactions must confirm the transaction’s success before the agent can release funds. The seller must first confirm the delivery of the goods or services, and the buyer must confirm the receipt and acceptance of the delivery, authorizing the escrow agent to release the funds to the seller.
Escrow costs or fees refer to the charges an escrow agent or company is paid for the services rendered. These fees cover the company’s costs in carrying out administrative tasks, documentation, title searches, and other responsibilities in the escrow transaction process. While some companies have fixed prices for a specific range of transaction amounts, others demand that their charges be paid as a percentage of the total amount involved, usually between 1 and 5 percent.
Understanding the key terms associated with escrow transactions is crucial for a seamless, transparent transaction. Hopefully, you have learned enough to make your next escrow transaction successful.
Peppa.io is a trusted online escrow service company that facilitates transparent transactions between buyers and sellers, including social media. It provides sellers with user-friendly storefronts to enable their customers to order products directly from the Peppa.io platform. Peppa also provides a safe and fast payment option for marketplaces and e-commerce companies for easy and seamless escrow transactions.