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Escrow; Escrow Agreement
An escrow describes a process whereby a buyer puts money into the custody of a third party with the intention of ensuring that funds are available for payment to the seller after one or more conditions have been met by the seller. An escrow agreement is a written instrument, such as a deed, temporarily placed with a third party (the escrow agent) by the agreement of two parties. The escrow agent delivers payment to the seller / beneficiary when the conditions of the contract are met. The benefits of using an escrow service for the seller include protection against:
- Various types of fraud, and/or
- Payment with an NSF check, and/or
- The buyer obtaining title to or possession of the goods before making the payment.
The primary benefits to the buyer include:
- The opportunity to inspect the merchandise before payment is delivered to the seller.
- An assurance that title will not pass before a certain date and not until certain requirements have been met and certain actions have been taken byboththe buyer and the seller.
The fact that there is an escrow account does not ensure payment to creditors. The fact that an attorney is involved does not guarantee funding into the escrow account. The obvious fact that the debtor is responsible for funding the escrow account means that the debtor may choose not to fund the account. There is also a risk that the debtor will not report the debts owed to some creditors to the escrow fund manager. Even if an attorney is the escrow agent, there is no assurance of payment, and the creditor company is not the client ofthe attorney makes no representations that cyour company will ever be paid.
© 2011 by Michael C. Dennis. All Rights Reserved.