Escrow solves the problem at the centre of any transaction between strangers: the buyer does not want to pay before receiving the goods and the seller does not want to ship before being paid. A third party holds the money until both sides have done what they agreed, then releases it. For higher-value private sales, that is worth the fee.
It is also frequently misunderstood, and imitated by people running scams.
How it works
The buyer pays the escrow provider rather than the seller. The provider confirms receipt, the seller ships, the buyer inspects within an agreed period, and the provider releases the money less its fee.
If something goes wrong, the provider follows a defined dispute process instead of the money simply having disappeared.
When it is worth the fee
Higher-value transactions between parties who have no relationship, purchases sight unseen, vehicles and equipment, and cross-border trades. The fee is small against the value at risk.
For low-value everyday purchases it is usually not worth it, and established marketplaces with their own buyer protection already perform a similar function.
What to check in a provider
That it is a real, identifiable company holding funds in a separate trust or client account rather than its own operating account. Financial services providers must be authorised, and you can confirm one with the Financial Sector Conduct Authority.
Fake escrow is a common fraud. If the other party insists on a specific escrow service you have never heard of and cannot independently verify, that is the warning rather than the reassurance.
What it does not do
Escrow does not verify that goods are as described beyond whatever inspection period is agreed, and it does not replace a written agreement recording what is being sold and on what terms.
Your obligations as a seller under consumer protection law remain, including accurate description and the buyer’s rights on defective goods. Data collected in the process carries duties under the Protection of Personal Information Act.
Frequently asked questions
What is escrow?
A third party holding the buyer’s money until both sides have performed, then releasing it to the seller less a fee.
When is escrow worth using?
Higher-value transactions between strangers, purchases sight unseen, vehicles and equipment, and cross-border trades.
How do I know a provider is legitimate?
Confirm it is an identifiable authorised business holding funds in a separate trust account, and verify it independently rather than through the other party.
What is fake escrow?
A fraud where the other party directs you to a service they control. Insistence on an unverifiable provider is a warning sign.
Does escrow replace a contract?
No. You still need a written record of what is sold and on what terms, and consumer protection obligations still apply.
Further reading
Originally published in February 2018. Updated September 2026 to explain how escrow works and when it is worth using, rather than profiling one provider.
