Say NO to Escrow!
© 1999-2002 by Tessa Hebert, all right reserved.
2-21-01 Note: This article has not been recently updated, except for the note below about I-Escrow's name change to Tradenable.
DEFINITION OF ESCROW:
An escrow service acts as a third party in a transaction, representing both the buyer and the seller, providing them with a safe place to keep the purchase money in escrow until the buyer receives the item and is satisfied.
This is the process of a transaction using an escrow service:
EBAY AND I-ESCROW:
I-Escrow has changed its name to Tradenable.
Please click here to see eBay's help page about Tradenable:
eBay offers users the escrow services of I-Escrow, a California company. I-Escrow's business information is available on its site in an article titled: About I-Escrow.
I-Escrow is required by California law to be licensed with the state, prove financial stability to the state, and provide a surety bond to the state.
Although it appears that eBay is providing its users with a safe way to conduct business with an escrow service, many sellers have recently expressed how unhappy they are that eBay promotes the use of an escrow service.
eBay's FAQ about I-Escrow includes these supposed positive benefits of using I-Escrow:
- Can receive and inspect the merchandise before I-Escrow sends the payment to the seller.
- Can send credit card information to a trusted source rather than a stranger.
Buyer's Reason #1 to Use Escrow: "Can receive and inspect the merchandise before escrow sends the payment to the seller."
This option is called "bid on approval" by many sellers, because it allows the buyer to return an item after inspection. This option is in direct violation of many sellers' policies. Sellers who are very careful to completely describe their items at auction and include pictures of their items do not want to give buyers a chance to have "buyer's remorse" and return the items without a valid reason. The seller who wants "all sales to be final" cannot abide by this option.
Ideally, the seller is honest and reliable, the item is completely and accurately described in the auction listing, and all potential bidders have ample time to request further information from the seller during the auction. At the point the auction ends, the seller expects the buyer to buy "as is."
The seller also wants to have prompt receipt of the buyer's payment. The use of an escrow service certainly delays the seller's receipt of payment.
While this option may protect the buyer from an unscrupulous seller who does not accurately describe the item, it does NOT protect the seller from unscrupulous buyers who return items on a whim or because of "buyer's remorse."
I-Escrow's solution to preventing unnecessary returns is simply not acceptable to most sellers, and many buyers may not want to pay the costs required by I-Escrow in the event of a return. (See "Cost of Return" below).
Buyer's Reason #2 to Use Escrow: "Can send credit card information to a trusted source rather than a stranger."
This option seems to imply that the eBay customer, who is the seller, is a stranger who cannot be trusted.
Many sellers rely on their reputations and past histories in business to reassure potential and future buyers of their honesty, trustworthiness, and abilities to complete a transaction. Any implication of a seller's dishonesty or lack of good business ethics can be deadly to a seller's business.
eBay sellers also rely on their positive feedback to reassure buyers about their honesty and trustworthiness. While eBay's feedback system may be flawed in that it allows "feedback padding," most sellers on eBay are trustworthy and honest and have worked very hard to earn their positive feedback ratings.
eBay's apparent promotion of the idea that buyers can trust an escrow service rather than an eBay seller is insulting to many eBay sellers.
Sellers pay eBay for the privilege of using its auctions to sell their items. The seller is therefore eBay's customer. eBay seems to be implying that its customers are not to be trusted.
It is my opinion that it would be far better for eBay to protect its users against feedback padding and for eBay to use user-registration validation to provide its users with safety and satisfaction in their auction transactions. While the use of an escrow service may facilitate the satisfactory completion of the transaction, it does nothing to eliminate some of the problems eBay users face, and the use of an escrow service may create its own set of problems.
Seller's Reason #1 to Use Escrow: "Have the ability to sell to buyers who prefer paying by credit cards."
This seems like a positive benefit until one considers that any seller who wishes to accept credit cards can do so by obtaining such privileges independently of any escrow service.
Credit card usage may be very convenient to buyers, but may NOT benefit a seller at all.
The use of a credit card allows the buyer to "bid on approval" and cancel the charge after receiving the item. This allows the buyer to have "buyer's remorse" and return the item.
Many sellers have refused to offer credit card use because of the fees charged by credit card companies. Indirectly, all buyers pay more when a seller accepts credit cards, because the seller's overhead includes the charges paid to the credit card companies for the ability to accept credit cards. Many sellers have opted to keep their costs lower by not accepting credit cards, thus allowing them to sell their items for a lower price.
Seller's Reason #2 to Use Escrow: "Have a great way to overcome a buyer's hesitation in dealing with an unknown source or in purchasing an expensive item."
Once again, we seem to have an implication that the seller is not to be trusted, by the use of the words "dealing with an unknown source." And once again, the buyer should be able to rely on the seller's feedback file on eBay. Also, prior to bidding, the buyer can contact the seller to ask for business references and/or to obtain answers to any questions the buyer has about the item at auction.
It would be far better for eBay to provide user-registration validation for its sellers, so that none of eBay's sellers are "unknown sources" and so that eBay's bidders could trust sending a large sum of money to an eBay seller.
ADVANTAGES OF USING AN ESCROW SERVICE:
Many sellers do not want to use escrow because it does NOT increase the likelihood of completing the sale in most cases, and it might imply that the seller is not to be considered trustworthy or honest.
Also, there are these factors which most sellers consider to be totally unacceptable:
As Is: A condition of the sale in which the buyer is expected to accept the item in its described condition, rather than any other expectations about the item's condition.
Bid on Approval: An option which allows the winning to return the item after inspection, for a refund.
Bidding Fever: A phenomenon of intense excitement while bidding, which often causes bidders to bid beyond any reasonable level of expectation, and/or beyond the actual value of the item.
Buyer's Remorse: The bidder's regret about having won an auction and refusal to complete the transaction, unrelated to any defect of the item or any fault of the seller. For instance, the bidder does not want to complete the transaction because the bidder believes he bid too high and the item is not worth that much, or the bidder found the item cheaper somewhere else.
Escrow: Money deposited with a third party which are to be transferred to the seller when certain conditions are met.
Escrow Service: The company where the purchase money is deposited and kept until the buyer receives the item; a third party in the transaction, which acts as the middle man between the buyer and the seller to insure a safe and satisfactory completion of the transaction.
Feedback Padding: Bogus feedback in a user's feedback file; may also include any feedback unrelated to a buy/sale transaction on that auction site. For instance, feedback which states, "An asset to eBay, very helpful person," may have nothing to do with the user's past performance in a transaction.
Validation: The verification all user-registration information.
This provides users with the guarantee that the other user's name, address,
and phone number are correct. While it does not guarantee honesty
or reliability, it does guarantee that a user at least has correct information
on another user involved in a transaction.
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