Escrow

Escrow is a legal concept where financial instruments or assets are held by a third party on behalf of two primary transacting parties, with the escrowed goods or funds being transferred only upon the fulfillment of the predetermined contractual obligations.

This system is often used in various types of transactions, such as:

1. Real Estate Transactions: In the case of a house sale, for example, the buyer will deposit the payment into an escrow account, and the seller will deposit the deed to the house. Neither party has access to what the other deposited until both have fulfilled their obligations in the transaction. Once the transaction is complete, the funds and the deed are released from the escrow account and given to the appropriate parties. This ensures that both the buyer and seller are protected during the transaction.
2. Online Transactions: Escrow can also be used in online transactions to protect buyers and sellers. In this case, a buyer will send payment to an escrow account, and then the seller will send the item. Once the buyer has received and approved the item, the payment is released to the seller.
3. Construction Projects: Escrow can be used to ensure that contractors complete their work before receiving full payment. The funds for the project are put into an escrow account and released in portions as the project is completed. This protects the person or organization paying for the project.

The use of escrow reduces the risk of fraud by providing a trusted third party who ensures that all parts of the transaction are carried out correctly. The escrow provider only discharges the funds or assets when all terms of the contract have been met by both parties.