How escrow works when you buy or sell an online business

Picture a locked box that neither of you holds the key to. The buyer puts the money in. The seller can see it sitting there, so they know it's real and the buyer is serious. It only comes out when the things you agreed have actually happened.

Without that box, someone has to take a chance on a stranger. The buyer sends money and hopes the code turns up, or the seller hands over the code and hopes the transfer lands. Anyone who's waited days for a payment that never came knows how that usually ends.

It starts with the deal in writing. Price, what's included, how many days the buyer gets to check it, who pays the escrow fee. Leave nothing for “we'll sort it out later”.

Then the buyer pays in. The seller hears about it from the escrow company itself, never from the buyer, and only once the money has actually landed. That's the seller's cue to start handing over, usually the code and hosting first, then the domain, then the app store and payment accounts.

When the buyer has it all, they say so, and the clock on the inspection period starts. If nothing's wrong, they accept and the seller gets paid.

That's how the big escrow services run website sales.¹ The inspection period is agreed at the start, anywhere from 1 to 30 days. If the buyer does nothing by the end of it, the money goes to the seller, so a buyer who finds a problem must raise it before the period ends.²

If you're the buyer, the inspection period is your last chance to catch a problem, so use all of it. Log in to every account and make sure the seller's access is gone. Build the code yourself, and check the live app still works after the move. Look up the domain: it should be registered to you, not just pointed at your server. Make a small test payment if you can, and watch it land in your own bank account. Then tick off the data, email lists and social accounts the agreement promised.

If anything's missing, tell the seller and the escrow company straight away, and do it in writing.

Escrow companies charge a fee, usually a percentage of the price. Agree who pays it before the buyer sends any money, so it isn't a surprise at the end.

On Prow: the escrow partner's fee is split equally between buyer and seller, and both of you see it before the buyer pays. Prow's own closing fee is 1.5% from each side when a deal closes, at least ₦5,000 each. See pricing for the listing fees.

Holding other people's money is regulated here. The Central Bank licenses payment companies in different categories, and most of them aren't allowed to keep customer funds at all. A payment solution service provider, a switch or a super agent can move your money, but it can't hold onto it.^{3 4 5}

So before you trust any escrow service, ask two plain questions: which licence do you hold, and who actually keeps the money? Usually the answer to the second is a partner bank. Then look the licence up on the CBN's own website. If they can't answer clearly, walk away.

On Prow: Prow never holds deal money. A licensed escrow partner holds it, and Prow only tells the partner to release it once the buyer has confirmed they have everything. Escrow is being set up now; until it's switched on, no money moves through Prow.

Fake escrow is one of the oldest tricks in online sales, and it still works. It usually goes like this. The buyer is friendly and keen, but insists on an escrow site you've never heard of. Soon after, the seller gets a smart-looking “payment secured” email and hands everything over. The money was never there, and by then neither is the buyer.⁶

A few things give these sites away. They're often only weeks old, which a WHOIS lookup will show you. They ask you to pay a person or an “agent” instead of a company account. There's no phone number and no named regulator, or the regulator has never heard of them. And the name is often a near-copy of a real brand, or leans hard on words like “safe” and “secure”.⁷

If you're selling, never hand anything over because of an email. Type the escrow site's address in yourself, sign in, and look for the money there.⁶

• The terms are written down: price, what's included, inspection period and who pays the fee.
• The escrow company is licensed, and you've checked the licence yourself.
• You chose the escrow company, or you know it well. You didn't just click a link.
• Sellers hand over nothing until escrow shows the money as received.
• Buyers check every account, the code, the domain and the payments during inspection.
• Problems are raised in writing before the inspection period ends.