Escrow
What is Escrow
Imagine you want to buy an expensive wristwatch, say a Rolex, from someone you don’t know. You’re concerned about paying money without receiving the watch, and the seller is worried about sending the watch without getting paid. This is where escrow comes in.
1. Agreement
You and the seller agree on the terms of the deal: the price, condition of the watch, and any other relevant details.
2. Escrow Service
You both decide to use an escrow service, a neutral third party that will hold onto the money until the conditions of the deal are met.
3. Deposit
You deposit the agreed-upon amount of money into the escrow account.
4. Verification
The seller ships the wristwatch to you. Upon receiving it, you inspect the watch to confirm it matches the description.
5. Release of Funds
Satisfied with the watch, you notify the escrow service to release the funds to the seller
Example
Let’s say the watch costs N5,000,000. You deposit N5,000,000 into the escrow account. The seller ships the watch to you. When you get it and confirm it’s the right one and in good condition, you tell the escrow service. They release the N5,000,000 to the seller.
If the watch isn’t as promised, you and the seller would work out a solution. The escrow service might refund your money, or you could negotiate a partial refund.
So, in simple terms, escrow is like having a trustworthy friend hold onto something valuable and the money involved until both parties are satisfied with the transaction. It adds a layer of security to buying and selling.
