Escrow means money, property, a deed, or a bond put into the hold or custody of a third party for delivery for a certain period of time, only after the fulfillment of the conditions specified. To elaborate, it is a legal arrangement in which any asset like money, property, website or software source code is handed over to a trustworthy third party (called an escrow agent) to be held for the period till the contingency or some pre-determined condition is fulfilled. Once the condition is met, the escrow agent will deliver the asset to the actual recipient, otherwise the escrow agent is bound by his/her duty to maintain the escrow account. There is an escrow period within which the conditions are to be fulfilled.
Though Escrow is used in context to mortgages and real estate, it is also now commonly used in the transfer of property and business deals like in websites and auctions. Escrow is not only used in mortgage and real estate industry but also in the field of judiciary, automated banking, vending equipment and related business dealings.
Types of escrow services
The nature of escrow services are industry specific. There are two types of escrow services:
- Normal Escrow Service
- Escrow Service with Inspection
Normal Escrow Service is simply the way of carrying the deal by delivering the product to the escrow agent as per the conditions described in the license agreement while the latter includes verification of the products before the delivery.
It requires the written approval of the agent to gain access to the product source code which is mentioned in the agreement.
While drafting the agreement, the Escrow instructions or the written document are signed by the parties giving them, which instructs the escrow agent about the specific steps to be completed so that the escrow can be closed.
