What is an escrow account, how does it work?

What is a transaction account?

An escrow account is a banking service where the bank holds the buyer’s money while the transaction is being made.

What is it for?

The transaction account provides a security guarantee for both the buyer and the seller, because the bank pays out money only when the transaction has actually taken place and the documents have been drawn up.

How to open an escrow account?

When opening an escrow account in the bank, an escrow account agreement must be concluded. The transaction account agreement is concluded tripartitely, between the bank, the buyer and the seller. Transaction account costs are determined individually by each bank. On average, the cost of an escrow account is 0.4% of the transaction amount. These costs are borne by the buyer, seller or both parties together. After signing the contract, the bank opens a transaction account and the buyer credits it with the agreed transaction amount. None of the parties involved in the transaction has the right to individually withdraw and otherwise deal with the amount of money deposited in the escrow account, except in cases where such rights have been granted to the party, and this is stipulated in the escrow account agreement.

When is the money credited to the seller’s account?

Funds from the escrow account are paid to the seller only when all the conditions agreed upon by the parties in the escrow account agreement have been met. If the documents submitted by the buyer to the bank are correct, the transaction is completed – the bank transfers the money to the seller. More information by contacting us.