Financial transactions are often accompanied by a large number of complexities and intricate obligations of releasing cash and preparation and maintenance of important legal papers. An escrow account is an arrangement where a third party is established who can receive and also give away cash on behalf of the main parties of the financial deal. An escrow account can also disburse and receive documents on behalf of the main parties of the deal.
The condition of the receipt and the disbursement is however agreed by the actual parties of the deal. Such accounts could also be created by a broker in order to hold the funds till the completion of the cancellation of the transaction. The borrower can also create a trust in the form of an escrow account from where the insurance premiums and other obligations like the taxes can be paid at regular intervals.
In the most classic way, an escrow account acts like a tank that holds the funds and the important documents and papers for the buyers and the sellers. This is a form of transaction that is used in a large number of fields. Very commonly escrow accounts are used in the United States into the domain of real estate business. Such escrow bank accounts or simple escrow accounts are often managed by credible lawyers or by company representatives. The main task of the officer is to see that all the due payments are made to all the parties related to the transaction. Of course, the escrow officer himself receives 1 to 2% of the cost of the property or the transaction done. Once the deal is closed all the legal papers are also disbursed to the concerned parties of the transaction.
Types Of Escrow Accounts –
Escrow accounts can be diversified and as per the kind of purpose for which they are being used. Some of the common domains where such accounts are used are
- Internet transaction and financial dealings.
- Banking functions – the ATMs are one of the classic examples of escrow accounts in the banking
- Intellectual property
- Real estate
- And very importantly corporate mergers and acquisition.
Different escrow accounts will call for a slight variation in the escrow account interest. However such accounts come with a large number of benefits and advantages. Let us take a look at them.
- Funds and capital is always kept ready and handy for disbursement. This helps in the proper processing of the deal.
- The task of producing and managing paperwork is well taken care of.
- No hassles are caused due to the task of disbursement of cash. No follow-ups are required; cash is disbursed in a systematic and in a timely manner.
- The parties related to the transaction can get the work done with minimum involvement in the task.
Conclusion – Finally these escrow accounts are facilitated by expert professionals. This acts as a huge benefit for the entire financial transactions. Chances of frauds or mistakes are reduced to a great extent. The work is carried on in a smooth and professional way.