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110 SE 6th Street (17th FL)
Fort Lauderdale, FL 33301
305 422 1072
An escrow is a contractual arrangement in which a neutral third party receives and disburses money for the primary transacting parties e.g., buyer and seller. The advantage of an escrow protects both parties by keeping the payment in a secure escrow account e.g., an attorney’s trust account, which is only released when all of the terms of an agreement are met as overseen by the neutral escrow attorney. The Escrow Attorney is NOT AN ATTORNEY FOR EITHER PARTY.
A typical escrow arrangement occurs as follows:
- Buyer and Seller agree to contractual terms – Either the Buyer or Seller contacts an escrow attorney. Both parties agree to the terms of the legally drafted escrow agreement. Buyer is provided the Escrow Attorney’s banking information. Seller gives the Escrow Attorney its banking information.
- Buyer pays Escrow Attorney – The Buyer submits a payment by approved payment method to our regulated Interest on Lawyers Trust Account. The attorney verifies the payment. Both the Buyer and Seller are notified that funds have been secured in said Trust account.
- A Deposit is paid or the Seller ships merchandise to Buyer – Upon payment verification, the Seller may require an initial deposit or may send the merchandise and submit proof of shipment.
- Buyer and Seller sign a release of funds agreement to Escrow Attorney – The Buyer and Seller sign an agreement allowing for the release of the all or any part of the funds.
- Escrow Attorney pays the Seller – Escrow Attorney releases funds to the Seller from the Trust Account.
Escrow do not have to be attorneys. However, attorneys often serve in the role of a Escrow because they are able to use Attorney’s Trust Accounts (also known as IOLTA accounts, which are used for short term escrow transactions). These are monitored by the state bar where the attorney is licensed and provide an additional measure of security for handling large sums of money.
As a licensed attorney, the escrow is subject to heavy penalties and stands to be disbarred if any funds are misappropriated. And the escrow may not provide legal services for any of the Paymaster clients, since it is considered to be a conflict of interest.
The escrow is not party to the transaction, and does not know the exact time that it will close. Part of his job is to check periodically with the escrow account to ensure that the payment has been transferred in, then to disburse the funds as per his directions. Nor is the Paymaster allowed to disclose the identities of the parties to the transaction.
Escrow services facilitate the transfer of commodities and financial instruments without the inconvenience that can arise through using Letters of Credit. No credit scores or bank references are required of either party. New companies with no established credit history can trade freely.
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