An escrow account refers to a trusted third party account that temporarily holds funds while a transaction is being made between the first two parties. An escrow account is usually used when the seller wants to safely assure the successful payment of the buyer. This happens during business transactions that involve large sums of money like those in real estate deals. The payment is made by the escrow account to the seller when all the terms of the financial agreement have been met.
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Advantages of an Escrow Account
The advantages of an escrow account include:
- It is a safe route for transferring money.
- Transactions can be customized to meet the needs of all parties involved.
- Banks allow multiple accounts to be opened in order to allow deals with a waterfall mechanism.
- There is adequate channel support today that ensures a smooth transaction can take place.
- Digital escrow accounts use a simplified manner for making and maintaining important documentation.
- Digital escrow accounts also offer online tracking of the transaction.
What is an Automated Escrow Account?
An automated escrow account is an escrow account that has been digitized. Automated escrow accounts have evolved from the conventional approach to manage escrow accounts which are intensive while creating many errors and reducing productivity. An automated escrow account helps you to execute and schedule transactions based on the terms and agreements without manual intervention.
Best Practices – Automating Escrow Accounts
- Maintain Coverage. Bank accounts used for escrow accounts must ensure they have the words “Escrow account” or “Trust account” clearly written on the signed agreement.
- Insured financial institutions. Maintain the escrow funds in a financial institution that has been in insured by the government to enjoy better security.
- Signature cards. The signature cards should reflect the number of signatures required on the escrow account. These cards must be regularly updated.
- Escrow trial balance. List all the open escrow balances as well as the check register and book balance on a monthly escrow trial balance.
- Accounting records. Maintain an accounting record to ensure comparison of balance.
- “Three-way” reconciliation. There should be a reconciliation made every month between the bank balance, register or book balance and the escrow trial balance. This should be prepared by an un-associated party to the buyer or the seller, someone unauthorised to initiate wire transactions as well as an unauthorised account signatory. The reconciliations should include the initial and the date of completion of reconciliation.
6 Top Global Providers that Help Automate Escrow Accounts
There are numerous amounts of providers that help you automate escrow accounts. You can choose one based on your requirements. While choosing a vendor:
- Find information about the provider’s fee and payment structures. The most trusted providers handle their transaction processing; they do not ask for money transfers to a person’s account.
- Understand how disbursements are made by the provider you choose. This will help you keep track of all the payments that are made. It will also help you choose a provider based on whether you want a partial payment regularly or payment only after the services have been completed.
- Do research on different escrow companies. This will ensure that you do not choose a provider that is not legitimate. If the provider you choose is not well-known, ensure that you verify their service with the concerned authority. You must also avoid companies that insist on not listing their customer service numbers.
- Ensure that the provider you choose handles the payment method you require. Different escrow account providers use different payment methods so ensuring that the one you choose uses the payment method you require is integral.
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A list of the top 6 global providers that help automate escrow accounts:
- NCC Group- This escrow provider is located in Manchester, United Kingdom. With 15,000 clients worldwide, this provider covers areas of software escrow and verification, cybersecurity consulting and managed services, website performance, software testing and domain services.
- Matcherino- This is a private escrow accounts provider based in America. They offer a range of prize pool escrow services that are transparent, well documented and tax compliant.
- Spruce- Spruce is an American escrow account provider that deals with mortgage lenders and real estate companies to provide title insurance, escrow, and closing services through a proprietary technology platform.
- itBit- Also an American based escrow account provider that offers services in the trading and global exchange market. It is built for institutional investors and offers a reliable and secure platform for crypto trading, escrow, custody and OTC solutions for Bitcoin, Bitcoin Cash, and more.
- MANGOPAY- This is a French payment solution that enables marketplaces, crowdfunding and sharing economy platforms in an escrow account. The clients are ensured to have an anti-fraud and anti-laundering process as well as comprehensive documentation.
- Stably- Stably is a privately owned, American escrow accounts provider that uses crypto-currency which allows fast transaction speed, anonymity, and immutability.
