Do you have questions about commercial escrow? Here are answers to some of the most common questions people ask about business escrow.

1) What is Commercial Escrow?

You can think of commercial escrow as the middle man who allows two companies to undertake a risky financial transaction. Of course, escrow is also relevant when an individual is purchasing a business. This “middle man” holds onto the money until both parties live up to their end of the arrangement. Once all the paperwork is signed and everything is in order, the escrow company then transfers the funds. As you can see, commercial escrow plays an essential role in safeguarding the transaction.

Related Content: What are the Potential Pitfalls in a Business Purchase?

2) What Are the Steps For Commercial Escrow?

Obviously, the terms of the agreement need to be negotiated and agreed upon, which can take some time to sort out. This generally involves hiring a lawyer to draft a legally-binding contract.

There are important steps in the commercial escrow process that help protect both parties. The first step is selecting a reputable escrow agent, or escrow company. It’s best, of course, to work with someone who has experience with commercial escrow. In California, licensed escrow companies are regulated by the Department of Financial Protection and Innovation (DFPI) to protect consumers.

Paperwork is put in order, along with any supporting documents. This includes pertinent information about the sale, like buyer and seller contact details, information about the attorneys who represent either party, the cost of the business transfer, and the property address, along with anything else that’s relevant, such as proof of ID. The paperwork must be detailed explicitly about the escrow transaction. Both parties agree to the contract and terms of the escrow transaction and sign all necessary forms. Once everything is taken care of, the escrow company is able to transfer the funds or property.

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Signing Authority

Often when you’re using a commercial escrow service, you’re dealing with entities instead of individuals. If this is the case, signing authority must be given to individuals who can act on behalf of the business or corporation. These signing authorities must be verified during the commercial escrow process. Without this authority, the escrow company can’t fulfill its function. So verification and signing authority is often a very essential step in the commercial escrow process.

Title Report and Closing Documents

This is the final and most important step in the commercial escrow process. It is the last step and involves the handing over of the deeds, title reports, and any other closing documents that were agreed upon in the initial signing of the escrow agreement. Any zoning warranties, a final review of the title, deeds and other important paperwork are agreed upon and the escrow funds are released before closing.

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3) Is Having a Commercial Escrow Mandatory?

Many people wonder if a commercial escrow is mandatory. The simple answer is that no, it is not a legal requirement to hire an escrow company. But if you want to have a smooth transaction, it’s best to hire this third party for your peace of mind, rather than run the risk of winging it with so much at stake.

Bay Area Escrow

If you need escrow services in the Bay Area, contact us at Bay Area Escrow. Our dedicated team is here to answer your toughest questions. Call us today at (925) 831-9099.