Escrow

What is an escrow account?

An escrow account (also known as a deposit in guarantee account or holding account) is a mechanism where an intermediary holds funds from a transaction until the conditions agreed upon between buyer and seller are met.

This system is used to ensure that both parties fulfill their commitments before releasing the money: the buyer is assured that payment will not be executed until the agreed terms are met, and the seller has the guarantee that the funds are available from the start of the transaction.

How does an escrow account work?

• Deposit of funds: the buyer deposits the money into the escrow account.
• Retention by the agent: the escrow agent (which can be a notary, a bank, or a specialized company) holds the funds while verifying that the conditions of the transaction are met.
• Release of funds: once the agreed conditions are fulfilled, the money is released to the seller.

When are escrow accounts used?

Escrow accounts are mainly used in high-value transactions or in operations where there is a higher level of risk or lack of trust between the parties. They are common in real estate sales, marketplaces, B2B operations, digital services, or agreements where product delivery is not immediate.

This mechanism adds an additional layer of security, as it ensures that payment is only released when the previously agreed conditions are met, protecting both the buyer and the seller from breaches or disputes.