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Using an Escrow Service on eBay

Escrow is a service that allows an eBay buyer and seller to protect a transaction by placing the money in the hands of a neutral third party until a specified set of conditions are met. Sellers note in their item descriptions if they're willing to accept escrow. If you're nervous about sending a lot of money to someone you don't really know, consider using an escrow company.

Using an escrow company is worthwhile only if the item you're bidding on is expensive, rare, or fragile, or traveling a long distance. If you're spending less than $200 for the item, think about purchasing insurance from your shipper instead — just in case. Remember, with purchases under $200, you're also protected against fraud through eBay. (You may be protected up to $1,000 if you pay through PayPal.)

eBay has a partnership with Escrow.com to handle eBay auction escrow sales in Canada and the United States. After an auction closes, the buyer sends the payment to the escrow company. After the escrow company receives the money, it e-mails the seller to ship the merchandise. After the buyer receives the item, he or she has an agreed-on period of time to look it over. If everything's okay, the escrow service sends the payment to the seller. If the buyer is unhappy with the item, he or she must ship it back to the seller. When the escrow service receives word from the seller that the item has been returned, the service returns the payment to the buyer (minus the escrow company's handling fee, of course).

Before you start an escrow transaction, make sure that you and the seller agree on these terms (use e-mail to sort it out). Here are three questions about escrow that you should know the answers to before you bid:

  • Who pays the escrow fee? (Normally, the buyer does, though sometimes the buyer and seller split the cost.)
  • How long is the inspection period? (Routinely, it's two business days after receipt of the merchandise.)
  • Who pays for return shipping if the item is rejected? (The buyer, usually.)
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