I've recently been involved in the closing of a transaction that used an escrow service and I'm once again amazed at how transactional intermediaries hold both the buyer and seller captive. Depending on whether the business climate is frothy or frigid, intermediaries clearly have the upper hand in transactional businesses. It's a great business to be in. In my opinion one that is fraught with monopolistic traits.
Typically a buyer and a seller duel with each other in negotiations. I am not going to belabor and rehash basic negotiation 101, but suffice it to say that typically one party is more eager than the other. Obviously, this is the weaker party. What the weaker party usually lacks, the stronger one uses to his advantage. Time is of the essence to the eager beaver transactor who will likely yield to get the deal done.
However, even when an agreement is struck, it is the escrow company or people involved in facilitating the transaction who have the true upper hand. There are fees, lots of paperwork, and little details that only appear immediately before a sale goes through. Failure to pay these fees and the deal does not go through.
To bring this down a notch to the reality of an average person, take the example of the sale of a home. The buyer and seller have agreed on a price. They have both spent a lot of time and good faith energy to get the deal done. Then the final closing statement appears with a ton of fees. Either they are paid or the deal does not go through. It's your typical last minute grinding but its actually from your middleman or escrow company.
Don't get me wrong, the escrow company is not the only one who does this. The lender or financing company does the same thing. You agree to general terms and prior to closure you sign the final loan documents with some extra fees added. By this time it is too late to secure other funding. Your lender has thus grinded you while you were held captive in a deal.
I'm sure one of these days the regulators will come along and make this business more transparent. From the perspective of a negotiation, it's really the best business to be in as long as transactions are taking place.
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