The seller can see that the funds are committed to his key and can’t be sent to anyone else. Now, an economist would say that a fraudulent seller could start negotiating, such as “release the money and I’ll give you half of it back”, but at that point, there would be so little trust and so much spite that negotiation is unlikely. Why on earth would the fraudster keep his word and send you half if he’s already breaking his word to steal it? I think for modest amounts, almost everyone would refuse on principle alone
Escrow is not done this way from reputed escrow service provider. This was just an approach from satoshi when no online/software escrow provider was existing at the time.
Here's an outline of the kind of escrow transaction that's possible in software. This is not implemented and I probably won't have time to implement it soon, but just to let you know what's possible.
There are some platforms providing escrow services today in which to ensure both buyers and the sellers are not scammed unless the fake ones are used.
I will make use of Bitcoin in this case, which means the buyer will pay fiat while the seller will sell bitcoin. Although, anything can be in the buy category.
The buyer
He has the bitcoin on the escrow platform, the escrow service provider will have control over the bitcoin in this case, but the seller will still be able to release the Bitcoin from escrow. If the seller pays but the buyer did not release bitcoin from escrow, the buyer will have to contact the escrow provider immediately, in which the seller will not have control over it at the time. If valid payment evidence like the payment receipt is provided and later found the seller guilty, the Bitcoin will be given to the buyer. So, the buyer in this case will also have nothing to lose as the bitcoin can be controlled by the escrow provider if the seller wants to cheat.
The seller
No fiat paid no Bitcoin released from escrow, not that risky as it is not even the matter of this thread. But buyers need to make sure and confirm the fiat has been sent, not through email or SMS message sent from the bank, but by checking his/her account balance directly.