How do I Avoid Escrow Fraud?

Placing money in escrow usually works to keep both parties to a transaction safe and ensure that the terms of the sale are fulfilled before money is released to the seller. Unfortunately, however, some people commit escrow fraud and use false escrow businesses or arrangements to steal money from unsuspecting parties. You may avoid escrow fraud by patronizing escrow companies that have been in the business for years and have built a solid reputation. Walking away from deals in which a party insists on using a particular escrow company may work as well, especially if the escrow company isn't well known. Additionally, you may avoid escrow scams in transactions in which you are the seller by using shipping services that provide proof of delivery.

One of the most effective ways to avoid escrow fraud is to choose a reputable escrow company. Fraudulent escrow companies are often fairly new, but they typically do a good job of making themselves look legitimate. Often, the scam artists that commit escrow fraud build professional-looking websites and obtain toll-free numbers in an effort to fool consumers. If a consumer calls the toll-free number to check on the service, the scam artist may answer the phone and behave in a manner that fools the consumer into thinking the service is legitimate. To avoid being fooled in this manner, you may do well to use an escrow service that has been in business for years and has a good, verifiable reputation.

Another way to avoid escrow fraud is to be wary of sellers who are insistent on using one particular escrow service. For example, you may suggest a reputable service that you’ve researched and are sure is legitimate. If the seller insists on using a different service, especially one that you’ve never heard of, this may be a red flag that the seller is attempting to commit escrow fraud. In such a case you may do well to walk away from the transaction and look for a new seller.

Sometimes it is the buyer who attempts to commit escrow fraud rather than the seller. For example, a buyer may agree to purchase an item and send money to the escrow company before receiving the item. Once he receives the item, however, he may not report the receipt to the escrow company. Instead, he may cancel the payment for the item through his banking institution. By doing so, he ensures that he can keep both the item he received and the money he was supposed to pay for it.

One of the most reliable ways for a seller to avoid escrow fraud involves using a shipping service that provides proof of delivery. For example, you may ask the shipping company to obtain a signed receipt for each delivered item. This way, the buyer cannot get away with stating that he never received the item, and you have a better chance of obtaining the funds that have been placed in escrow.