Escrow can be described as a safe method where both buyers and sellers are protected in a deal. It is a process involving a neutral third party that holds funds or assets in a deal until all the terms and guidelines of the deal are met. This will determine if the corresponding parties have performed their duties so that funds or assets are released to them.

The use of the service will enable a buyer to have security that the seller will deliver the goods or services as promised and that the sellers are paid for the products they offer. This service will guarantee security and trust in carrying out a deal, therefore making this guidance the preferred method for various online and offline deals.

ALSO READ: How Disputes are Resolved in Escrow Transaction Process

Disadvantages of Not Using Escrow

When there is an absence of escrow, risks for both the buyer and seller can occur. Some risks to both buyers and sellers when escrow is not being used include:

1. Fraudulent Transactions: Dealing without escrow will involve the risk of fraudulent transactions. Sellers may fail to deliver the products or services promised, and buyers may fail to make the payments agreed on. The essence of the escrow process is to ensure that such fraudulent activities do not occur.

2. Lack of Payment Protection: Sellers will fail to receive payments for products or services delivered, thus being at a loss in business. On the other hand, buyers may have made payments for goods or services but not received them. Escrow ensures that payments offered are held securely until parties fulfil their duties.

3. Legal Complications: One can have legal wrangles if not using escrow for handling transactions, especially between buyers and sellers. It may even become challenging to prove the terms of the transaction without a reliable, neutral third party involved in the transaction process.

4. Trust and Reputation Issues: The practice of skipping escrow may lead to trust and reputation issues for both parties; buyers and sellers. When parties don’t have escrow security, they may be doubtful about involving in transactions with each other in the future. This may deprive considerable business opportunities.

ALSO READ: How to Open an Escrow Account in Nigeria

Fraudulent Activities

One of the greatest risks of not using escrow in transactions is exposure to fraudulent practices. Without an escrow account, fraudulent individuals who cheat gullible buyers or sellers can cause harm. Despite their promise to give goods or services, they are not delivering the promised goods/services after receiving the payment. This causes financial loss to the victim.

Through an escrow account, the money or assets will be held until the obligations in the contract from both sides are satisfied. This guarantees the buyer of received goods or services guaranteed to him and the seller is sure to have received payment for products and services which is secured. With an escrow account, buyers and sellers are secure from fraud.

Lack of Payment Protection

Another major risk of not using escrow is the lack of payment protection for sellers. Without escrow, a seller’s payment may be at risk. The buyer may promise to pay, but after receiving the service or product from the seller, resist the payment.

This means that buyers are equally at the same risk. The risk might be that of not receiving the services or goods promised. The seller takes off with the payment without delivering the promised goods or services, leaving the buyer nowhere to go.

An escrow account provides payment protection services to sellers. The funds will be held until the buyer has confirmed receipt of goods and services. This way, before releasing funds, the seller will have made sure of payment for goods and services. It goes without saying that insecurity issue is brought to buyers to the fact that payment goes through only when they receive the promised goods or services

ALSO READ: How Disputes are Resolved in Escrow Transaction Process

Legal Issues

Failure to use an escrow incurs legal execution during the transaction, especially if everything goes south between the buyer and seller. There is no third, neutral party that will prove the terms and conditions agreed upon.

The settlement of disputes, in the absence of escrow, may often require a court of law, which is procedural, long, and time-wasting, and besides, it is a costly and worrying affair for the parties involved. With escrow, transactions are structured in a way that helps manage and sort out issues or disputes that may arise easily.

Escrow ensures that there is less legal risk for buyers and sellers and that the process of transactions is more fluid.

Trust and Reputation Issues

Escrow skipping can cause major trust and reputation issues for both the buyer and the seller. In the absence of the security and the protection of an escrow, many parties will not want to engage in future transactions with one another.

When a buyer does not obtain their desired good or services which were paid, they become exploited and lose trust in the company, not wanting to do business with them again. When a seller is not paid for the sale of services or products, they will have lost value and business out of that, not wanting to do business with them.

Safeburse is an escrow service that creates trust and very honest judgments in transactions with a resulting secure and reliable way to perform business. When transacting business, Safeburse will help build trust and create a good conducive relationship between buyers and sellers.