Escrows are commonly used in real estate transactions, where deposit money is held safe in an Escrow Account until the terms of sale have been met. Escrows are also used in business transactions as a deterrent to fraud where the buyer and seller are unknown to each other. Escrows also play an important part in mergers and acquisitions when a percentage of the purchase price of a company may be placed temporarily in an Escrow account for protection against unknown creditors.
In all cases, Escrows involve a fiduciary relationship between the Escrow Agent and the other two parties, which requires the utmost integrity and objectivity. Escrow agents usually charge a set-up fee that varies based on time invested, drafting of the Escrow Agreement, and its execution.