And most online escrow companies operate at Internet speeds, using a lot of automated processes to close the purchase or sale in a matter of hours, or a few days at the most. Some services offer a money-back guarantee if the buyer doesn't come through with the money or the seller never ships the product. The services require both the buyer and seller to register for the service with a credit card, and the buyer usually pays for the product up front. The seller then either sends the product directly to the buyer, using a shipper like Federal Express that tracks shipments, or to the service itself. If the buyer never receives the product, or if it doesn't meet their expectations, the escrow service helps the two parties negotiate a new deal or makes sure that the buyer gets a refund and returns the product in resellable condition.
Some services also say they carry insurance policies to cover losses to either the buyer or seller.
That sense of security doesn't come cheap. Typically, escrow services charge a hefty 2.5 to 5 percent of the purchase price. Looking Over Escrow's Shoulder Until recently, Internet escrow companies haven't been required to prove their own trustworthiness. To address the potential risks to consumers, the California state legislature amended the state's escrow laws. The new law makes it illegal to operate as an unlicensed escrow agent.