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An escrow deposit is the initial funds placed into an escrow account by one party to secure atransaction.
For debt settlement clients, these are the regular deposits - ACH debits, checks, wire transfers - made into their dedicated savings accounts.
Escrow deposits represent a party's commitment to a transaction and their ability to fulfill financial obligations.
The key principle: escrow deposits are accessible to no one - not the buyer, not the seller, only theescrow agent acting according to the agreement.
Escrow deposits vary significantly based on the transaction type and purpose:
A single deposit that covers the entire transaction amount upfront.
Example: A private equity firm acquires a SaaS company for $8.5 million. The buyer deposits the full purchase price into escrow on day one. The funds remain there during the 90-day due diligence period while the buyer's team validates revenue figures, customer contracts, and technology infrastructure. If the buyer discovers material misrepresentations or the seller fails to meet contractual obligations, the deposit is returned. If everything checks out, the funds are released to the seller at closing.
Partial deposits made early in a transaction to show commitment while negotiations continue.
Example: A retail chain makes an offer on a 50,000 square foot commercial property listed at $12 million. They include a $500,000 earnest money deposit (typically 3-5% of purchase price for commercial real estate). This money goes into escrow immediately when the seller accepts their offer. It demonstrates they're a qualified buyer and won't tie up the property then walk away with out cause. At closing, the earnest money becomes part of their down payment. If they back out for reasons not covered in their contract contingencies - like failing to secure financing within the specified timeframe - the seller may keep the earnest money.
Regular deposits made over time, building up funds until a target is reached.
Example: A debt settlement company serves small business owners struggling with commercial credit card debt. A restaurant owner owes $85,000 across multiple business credit cards and hasn't been able to make minimum payments for 4 months. She enrolls in a debt settlement program and agrees to deposit $1,800 per month into an escrow account via automatic ACH debit from her business checking account. Each month, her deposit accumulates. After 10 months, her escrow account contains approximately $18,000 (after fees). Her settlement company negotiates with American Express, who agrees to accept $15,500 as payment in full for a $32,000 balance. The escrow payment is made, and she continues monthly deposits to settle her remaining creditors.
Deposits made at specific stages as a project or transaction progresses.
Example: A healthcare system hires a construction firm for a $4.2 million medical office building renovation. Rather than paying everything upfront or at the end, they structure the payment in escrow with milestone deposits: $1 million when foundation and structural work is complete, $1.3 million when HVAC and electrical systems are installed, $1.2 million when interior finishes and medical equipment hookups are done, and the final $700,000 upon completion, inspection, and occupancy permit approval. Each milestone's funds are deposited into escrow before that phase begins, then released when the healthcare system's project manager verifies the work meets specifications and local building codes.
Escrow companies typically accept multiple deposit methods:
Key things to understand about escrow deposits:
