Holding Money In Escrow: Everything You Need to Know

Escrow is an important part of any monetary transaction. An escrow company acts as a “referee” of sorts, ensuring both parties involved hold up their end of the deal. Typically, when you hear the term “escrow,” you probably think of real estate-related services where the impartial third party is charged with securing assets while home inspections are being completed and the deal is being finalized.


Although this is definitely true, escrow is also much more than that. The broader application of escrow is “holding escrow,” which refers to a range of large-money transactions including:

  • Buying expensive goods and services 
  • Private capital market transactions such as mergers and acquisitions
  • Stock investments
  • Online sales
  • Real estate transactions

New Venture Escrow is ready to help you close on any transaction, no matter which type it may be. That’s why we’re sharing this handy guide on everything you need to know about holding money in escrow, so you can be prepared to tackle your sale or purchase with the knowledge and confidence you need to maneuver through it. Let’s dive in!

what is holding escrow

Why Do Buyers Need to Hold Money In Escrow?

The truth is, spotting a fraudulent seller isn’t always easy, even for those individuals who make online purchases frequently. There are fake profiles and fake goods that aren’t always easy to spot. In fact, online shopping frauds grew at a rate of 30% in 2020 – with one in ten adults falling victim to a scam or fraud every year.

ecommerce fraud

Some of the most common types of fraudulent situations include individuals asking for money upfront via a bank transfer or even PayPal. You may believe you are fully secured within your transaction via third-party online payment providers, but this isn’t always the case.

This is where escrow comes in. For major monetary transactions, you want to have a sense of security to give you the confidence to pursue the deal. If you enter into an agreement with a fraudster, and the money changes hands, and there isn’t typically a lot you can do. You might need to reclaim any money should the goods arrive not as described or if there is some other issue related to the product or services you paid for. 

On the other hand, if you agree to sell your goods or services in exchange for money, you are at risk of only receiving part of the money – or none at all.

An escrow company like New Venture Escrow will ensure a safe and secure way for the buyer to receive the product they were promised, and for the seller to receive the funds they agreed upon. 

How to Reduce the Risk of a Transaction

When dealing with online transactions, it’s important that you do things to help minimize the risk of a deal gone wrong. This is relevant to both the buyer and the seller. There are several things you can do to help ensure your safety, including:

  • Avoiding upfront payments or direct transfers into your bank account. 
  • Avoiding payment via cryptocurrency.
  • Use an escrow service to pay for goods and services.  

Step-By-Step: How to Hold Money In Escrow

Escrow can be used for various transactions, including real estate, stock issuances, and online sales. Money from the buyer is held in an escrow account until the transaction is complete, or the buyer is able to receive or verify the condition of the product. 

Once the buyer agrees to the transaction the money is released to the seller from the escrow account. The company managing the escrow account generally takes a fee for performing the third-party service.

holding escrow transaction

New Venture Escrow makes transactions for buyers and sellers straightforward, hassle-free, and completely transparent. Here’s how to hold money in escrow:

  1. The buyer and seller agree to the terms of the transaction.
  2. Payment is sent to the escrow company.
  3. Seller ships the goods or provides the service to the buyer.
  4. Buyer accepts the goods or services. 
  5. The buyer has a number of days equal to the agreed-upon inspection period to ensure they received what you expected.
  6. The escrow company releases the funds to pay the seller.

Hold Money In Escrow With New Venture Escrow

New Venture Escrow is dedicated to creating a positive, efficient, and transparent escrow process for California buyers and sellers. If you’re on either side of a high-value transaction and require a third party you can trust to secure the deal, get in touch with us today so we can help you with all your holding escrow needs. 

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