In a domain name escrow, an independent, trusted company acts as a third-party agent in the selling-buying process. The escrow agent connects the buyer to the seller, and ensures that both parties receive exactly what was agreed to before the purchase. In other words, the buyer will only receive the domain name once the seller has paid the escrow. And the seller will only receive the compensation for the domain name once it has been transferred to the buyer.
The third party escrow agent will not only collect and disburse funds, but will also verify domain name ownership prior to the transaction, collect documents or other important materials from the seller, and execute the agreement based on contractual prerequisites.