Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 8

When you buy something online, you typically have to use your credit card, make an electronic fund transfer, or send a check before the goods that you bought are sent to you. If you are buying a large-ticket item, such as a car, you are not about to send funds without being assured that you will receive the car in the condition promised. Enter the concept of escrow.
Escrow Accounts
Escrow accounts are commonly used in real estate transactions, but they are also useful for smaller transactions, particularly those done on the Internet. An escrow account involves three parties-the buyer, the seller, and a trusted third party that collects, holds, and disperses funds according to instructions from the buyer and seller. Escrow services are provided by licensed and regulated escrow companies. For example, if you buy a car on the Internet, you and the seller agree on an escrow company to which you send the funds. When you receive the car and are satisfied with it, the escrow company releases the funds to the seller. This is a type of secured transaction.
Enter Escrow.com
One of the best-known online escrow firms is Escrow.com, which had provided escrow services for more than $1 billion in secured transactions in 2012. All of its escrow services are offered via its Web site and provided independently by Internet Escrow Services, one of its operating subsidiaries. Escrow.com is particularly useful for transactions that involve an international buyer or seller. It has become the recommended transaction settlement service for Auto-Trader, Resale Weekly, Cars.com, eBay Motors, and Flippa.com.
Critical Thinking
How do online escrow services reduce Internet fraud?