Quick Tips for Escrow Program on eBay

Though eBay is generally a very safe forum in which to buy and sell, there is always some element of risk when engaging in commerce with another party whom you’ve never met. The potential consequences of this risk increase greatly as the amount of money to be exchanged in the transaction increases.

One way to protect yourself as an eBay buyer is to be sure to always make purchases with PayPal or a major credit card since both of these payment methods offer some measure of buyer protection in case of undelivered, damaged, or unsatisfactory goods. It is important to know, however, that credit card payments don’t protect sellers nearly as much as PayPal and may not be enough for the most cautious buyers or when transactions sizes run into the many thousands of dollars.

For these types of situations, you may want to transact payments through escrow.

The Meaning

Escrow services are services that act as payment intermediaries. They accept payment from the buyer, then notify the seller that the buyer has indeed paid; once the item is delivered, the buyer notifies the escrow service that all is well and the funds are released to the seller. In this way, both buyer and seller enjoy an increase in the measure of protection that they enjoy—the seller knows that the funds are both available and good, and the buyer knows that the seller won’t receive any money until a satisfactory item has been received.

The use of escrow is a common practice in many conventional types of commerce, including in the buying and selling of real estate. In today’s ship-it-around-the-world culture, however, escrow may also be coming of age for other types of transactions in which the buyer and seller are unfamiliar to one another and may never even meet on a face-to-face basis.

On eBay, escrow services are most commonly used for very expensive collectible, furniture, electronics, or computing items or for sales of automobiles or other motor vehicles on the eBay Motors site.

Using Escrow on eBay

If you’d like to use escrow for an eBay transaction, here are some things to keep in mind.

eBay has approved the use of escrow.com for transactions, and the reason for sticking with this recommendation goes beyond mere marketing purposes. Escrow fraud is a very common form of fraud on eBay. The agreement by convention to use a known and recognized service like escrow.com protects all involved from fraud—which is the reason for the use of escrow in the first place!

If, as a seller, you want to use escrow, make clear in your listing description that you require buyers to pay through escrow and that no other forms of payment will be accepted.

Because most sellers do not have any hard and fast policy with regard to escrow, it isn’t often mentioned in item listings by sellers unless required. If you are interested in buying an item only if you can pay through escrow, contact the seller of the item in question and ask whether he or she is willing to accept an escrow payment.

Serious Business

Escrow is not free, and escrow companies generate revenue by charging a fee for each transaction. Trying using an escrow calculator to calculate the fees that will be paid for a given dollar value. Either the buyer or seller can pay these fees; it is up to you and your trading partner to decide who will be responsible. Sellers should remember, too, that there may be additional fees for having the funds delivered after the transaction, depending on the type of payment requested.

As a buyer, if you reject the item being purchased or pull funds out of escrow by any means, you’ll be responsible for all escrow fees assessed, as well as for the cost of shipping the item back to the seller, before your funds are re-released to you. For this reason, escrow should not be seen as a way to make returns easier or to circumvent the seller’s own return terms.

Once buyer and seller have mutually agreed to use escrow services to complete a transaction, keeping in mind the tips above, actually doing so is a simple affair. Each trading partner should visit escrow.com, create a new account there if necessary, and create a new transaction for the auction in question by following the given prompts.

Both will be asked a number of questions, including who will pay for shipping, how much time the buyer has to inspect the goods, and who will pay for escrow fees. Both buyer and seller must enter the same information for the new transaction to be created and for payment to then occur. Ebay's website offers more information on using escrow services.