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Once the buyer's payment is approved, the escrow service contacts the seller and verifies that payment has been made.
The escrow service keeps a hold of this payment until the buyer confirms that the seller has sent the item, and that the item is as described.
After the buyer's confirmation has been made, the seller receives his/her money from the escrow.
One of the most used escrow scams is the arrangement of false escrow services.
This scam is often very skillfully set up, and happens victimize people more easily than many other online scams.
Basically what the scammer (or scammers) do, is set up a phony escrow service.
They start by creating a website that could fool even the trained eye into believing it is real escrow website.
Once this fake escrow site is setup the scammers begin going to various auctions as both buyers and sellers, and begin bidding on, and selling expensive items in order to gain "customers" for their fake escrow service.
If a scammer goes into an auction as a buyer, the scammer often will bid as high as needed to win the item.
Once the auction is over the buyer contacts the seller with an email saying something like.
"I would like to use an escrow service for this transaction and I have found that www.somefakemadeupescrow.com has been very reliable in the past, and I would prefer to only use this escrow service."
Shortly after accepting to use the fake escrow the seller will receive yet another email, this time stating something like:
"Your buyer has just sent payment in the amount of (the winning bid price). This amount has been verified and will be held in a non-interest bearing trust account, until the buyer receives and approves their item."
Once the seller gets this notice, he/she sends the item to the buyer (believing that payment is soon to follow).
The buyer receives their expensive item, however the seller never receives payment from the fake escrow.
When the seller tries to make contact with either party (buyer or escrow) all attempts fail and the seller never hears from the buyer or the fake escrow service again.
Now, if the scammer goes into the auction as a seller, the scammer often begins by listing several very expensive items for sale.
The auctions usually state that the bidder must use an escrow service to make payment for the item.
After the auction ends, the winning bidder receives an email stating something like:
"I would like you to use an escrow service for this transaction and have found that www.somefakemadeupescrow.com has been very reliable in the past, please use this escrow service to safely send your payment. I am willing to pay all escrow fees for this transaction."
If the buyer decides to go ahead with the transaction he/she must use the seller's fake escrow service.
After the buyer sends payment to the fake escrow, the fake escrow takes the buyer's money and the buyer nevers sees their item or money again.
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