Using an escrow protects both buyer and seller.
In terms of domain names, an escrow is an arrangement made under contractual provisions between the transacting parties (domain buyer and the domain seller), whereby an independent trusted third party receives and disburses money for the transacting parties, with the timing of such disbursement by the third party dependent on the fulfillment of contractually agreed conditions (such as transfer of the domain name ownership) by the transacting parties.
An escrow service simply acts as an agent. The buyer will transfer the purchase amount to the escrow service provider, who will then inform the seller when the funds are received. The seller will then begin the domain transfer process. Once the buyer has confirmed full ownership and control of the domain name, the escrow service provider will then transfer the funds to the seller the any escrow fee (if the seller agreed to pay the fee).
Escrow provides added security and protection for both buyers and sellers. eBusinessDomains.com highly recommend that you conduct all domain transactions via a reputable escrow service provider. The charge for escrow services can be as little as 3% of the domain sales price.