Last month we discussed the general difference between residential and commercial transactions. This month, we have a two part series on the overall Commercial Escrow Process. Between these two articles, we are looking to give you a comprehensive look at the commercial transaction process.
Commercial transactions have less statutory protection than private ones. This is good and bad. The downside is that you have to be more cautious. The upside is that it allows you to come up with some unique ways to setup the deal.
We break the process down into four steps and shall tackle the first two in the initial part of this series.
Step 1: Setting up Escrow
Over 100 years ago, escrow was created as a third party to protect the rights of each individual or entity in a transaction. This happens for residential and commercial transactions. It solve the issue of trust between all the entities involved.
With commercial transactions, the escrow process is defined in detail due to the shear size and complexity of the transaction. There are often multiple parties involved and the monies could come from more than one place. Additionally, the statutes are not setup to require anything for commercial dealings. Thus, escrow has parameters setup to give each party ample time to do their due diligence. This is in the escrow agreement and the escrow officer reviews the terms before the transaction closes.
Step 2: Escrow Agreement in Commercial Transactions
Prior to escrow opening in a commercial transaction, there must be an agreement that outlines the details of the transaction. It will usually set out what the duties of the escrow officer are and when funds can be released.
While residential transactions usually have a standard escrow agreement, a commercial one is highly customizable. The similarities are usually the following:
- A statement assigning the escrow company.
- Requirement for escrow to not mix monies.
- Parameters of what each side needs to provide before funds release.
The escrow officer is not responsible for checking each item in the agreement. They are only there to facilitate the exchange. When all the terms are met, each side will instruct escrow to release the monies.
So far, we’ve only touched the tip of the commercial transaction process. Check back later in the month for the next two steps in the process or contact Bay Area Escrow.
From a rare Picasso to a beautiful oil painting from a prominent Bay Area artist, artwork can be a source of beauty, pride, and occasionally- deception. Money changing hands without any intermediary can expose art buyers to a ton of risk. Artwork escrow is a solution to facilitate art transactions and protect both parties.
Many pieces of popular or valuable art are subject to forgery, making art authentication an important step. Original works are often valued at thousands of dollars. Thus, artwork escrows allow for the right protections.
How Do Art Authentication and Escrow Work?
Escrow in art transactions involves a third party escrow who will hold the funds for the transaction along with the ownership/authentication paperwork for a piece of art. A set time frame allows the buyer to properly authenticate the artwork. Once everything is confirmed, both parties sign off on the transaction. This will then allow the artwork to be released to the buyer, and funds to the seller.
What Are My Other Options?
Besides escrow, the only other option for protecting yourself is to trust the person you are transacting with. The seller would need to trust that the buyer will actually pay while he/she does extensive background investigation or examination of a piece of artwork. At the same time, the buyer would have to trust that the seller will give him an actual piece of artwork that is original and with full ownership rights.
What Should I Look for in an Escrow Company?
Experience and trust are the two most critical factors when you consider an escrow company. There are many online escrows and smaller, pop-up escrow companies. However, without the expertise and knowledge, an escrow company could prematurely release funds, not identify all the claims against an artwork, or not follow the requirements within the sales contract.
Should you have an artwork that you are trying to buy or sell, reach out to Bay Area Escrow Services. We have over 30 years of experience knowing your rights and how you can protect them.
Real estate transactions can be simple or a nightmare. However, the potential for drama goes up exponentially when we discuss selling or buying commercial property.
Why? What are the differences?
More than Two Parties
Residential sales usually involve no more than two individuals on each side. Two buyers and two sellers is the most you see on almost all residential deals.
Commercial property transactions are different. Sometimes a commercial transaction will have one party. But this one party could be a corporation, LLC, or partnership whereby there could be 5, 10 or even more people involved. This alone can dramatically impact the complexity of a transaction.
Most residential escrows are complete in around 20-45 days. It’s not the same for commercial transactions. In general, a commercial property has more complicated title searches, legal requirements, and timeframes for ensuring the property sale is properly done.
For instance, a residential home may have an appraisal, termite inspection, and home inspection. A commercial property would have all these and potentially environment studies for chemical contamination, technology analysis for reviewing limitations with computer lines, and zoning approvals.
A key to a smooth transaction is to understand what’s going on with all requirements. A quality escrow agent will keep you informed, so you can feel comfortable with the status of the transaction.
Buying Commercial Property has Greater Risk
Commercial deals usually have a much greater degree of risk than residential transactions. Whenever there are companies or legal entities conducting business, risk increases because entities usually have limited liability and the use of the building alone could be a cause for concern. For instance, what if the property is subject to environmental contamination or the city doesn’t approve a zoning change? Therefore, commercial escrows serve an even bigger role than with with residential transactions.
Residential and commercial transactions are subject to different laws and regulations. A commercial property purchase usually has less regulation, but often results in more due diligence taken by involved parties to ensure everything is kosher. Laws generally focusf on residential deals where it is assumed that the parties aren’t as sophisticated as with commercial property sales.
Should you have questions about a residential or commercial escrow, talk to the experts at Bay Area Escrow.
The home buying process in complex and has many moving parts. Chances you are your home buying process may be kind of confusing. How can you protect yourself from getting swindled out of money without receiving the actual home in return?
Don’t take risks when you’re purchasing a home, this is a large purchase. Before buying a home, be familiar with your budget, any potential issues with the property, and any variables which could influence your decision.
Escrow is the great protector in situations such as this. Once a buyer likes a home and a seller agrees to their offer, the escrow process lasts until the property ownership exchange is completed. Your escrow company is a third party while buying the ideal home. It offers protection to the home buyer, seller, and the loan owners too. Both the buyer and seller sign documents agreeing to terms, which they cannot back out of without a genuine reason. Escrow holds documents from the seller and money from the buyer until the transaction completes. Escrow is a neutral party that helps until the agreement finalizes.
How Does an Escrow Company Help?
An escrow agent is neutral. They ensure that transaction terms are carried out and all requirements from the buyer and conditions from the seller are met. When the buyers’ payments are in escrow account, the seller can be confident that they’ll be paid in full after fulfilling requirements.
When buying or selling your home, it is critical to choose an escrow company with experience and knowledge of the process. Being able to contact a human in a local office can also be important. There are many online escrow companies who claim to be responsive, but fail to appear when problems arise.
While transacting a huge amount you shouldn’t take fraud risk or compromise payment. Never buy a home without an escrow officer. Take time to research experienced, knowledgeable escrow companies in your area. Your realtor may recommend someone, but it’s important that you do your own due diligence, because this choice will affect you directly.
This is how you protect your best interests in the home sale transaction. If you have questions about how real estate escrow works, contact Bay Area Escrow Services.
Have you heard the phrase “software escrow?”
The best software usually comes from a team of clever computer science engineers. It’s an invention to the same degree that a new product is. Due to the increased necessity of quality software, it’s now vulnerable to theft and tampering. Also, since software is intellectual property, stealing it is considered an intellectual threat, which is a crime punishable by heavy penalties. From vendors to buyers, everyone has something to lose in a bad transaction. That’s why software escrow has become a tool for preventing legal issues.
What is Software Escrow?
A software escrow is an agreement between two parties: licensor and licensee. Under this agreement, the licensor imparts the source code or file through an escrow agent to the licensee. There is an agreement between the two upon certain conditions which are agreed upon by both of them.
The purpose of this agreement before the deposit of software is the same as an insurance package for your house or property. It will safeguard the software in many ways in case of a problem.
Why You Need This Service?
Most of the time, a software escrow is requested when the individual licensing it realizes how essential the program or app is to their company’s growth. In other cases, a software can directly impact the revenue of the company and its operations. You may also want to invest in escrow services when licensing or selling a valuable piece of code. This will protect you in selling or licensing your program while safeguarding the funds received.
What Are the Components of Software Escrow?
Usually, the agreement consists of the standard details such as:
- The deposit of software with the escrow agent and it’s updates which will be held for the licensee.
- All the details and documents concerning the software like how will it be built or compiled. The tools and names are all detailed in the documents.
- The information of the third parties whose developmental tools are used in the software along with their contact information.
These are basic things that are usually part of the software escrow agreement. Each party has to go through them before signing the deal.
Finding the Right Escrow Agent
You need to be careful when you are looking for a software escrow agent, because this third party agents play a great role in the agreement. A reputable escrow agent will take care of the key factors, which should be part of a healthy agreement between licensor and licensee.
Whether you want to purchase or sell digital intellectual property, neglecting the use of an escrow company is not in your best interests. Therefore, look for a reputable company where you can seal the deal with a trustworthy agent.
If you have questions about how software escrow works, contact the experts at Bay Area Escrow.
This year, we registered for the Susan G. Komen Race for the Cure because we wanted to take action and be More Than Pink™. At Bay Area Escrow, we want to make an impact in the fight against breast cancer and need your help. Please consider making a tax-deductible donation today in support of our fundraising efforts.
Your support helps us get one step closer to a world without breast cancer. 75 percent of the money raised through the Race stays in the community to fund local breast cancer education, screening and treatment programs. The remaining 25 percent supports groundbreaking breast cancer research.
Together, we are fueling the best science, boldest community and biggest impact in the fight against breast cancer. And we will not stop until this disease is gone forever. That’s our promise. Will you please join me in this fight by making a donation today? Click Here to donate.
Buying the perfect domain name is a great start for any business. But what if the domain name of your dreams (or business plans) is already owned by someone else?
When you search for your favorite registrar for the domain you want, it may come up unavailable. This can mean it’s privately owned, and unavailable for purchase on the open market. But that doesn’t have to be the end of it.
You can actually buy a domain privately. And it’s actually not difficult, as long as the owner is willing to sell. It can be accomplished in 4 fairly simple steps.
Discover Who Owns Your Dream Domain
The listed owner, if there is one, will be publicly available on the WHOIS directory. Search using the domain you hope to buy, and if there is a publicly listed owner, their info will be shared with you. This may be a private owner’s home address, although it’s also very likely to be a business name, address, and contact information. Occasionally, the listing will be private with no contact information.
Reach the Decision Maker
The information listed on WHOIS will not always take you directly to the person with the authority to sell. One of the fastest ways to shut down the conversation is to ask about buying the domain with someone that doesn’t have the authority to make that decision. Start with the contact information you have and use it to find out who you should be talking to.
Actually, before you start negotiating, know your budget and the value of the domain. Then start negotiations, ready to pay what’s fair, and aware of what would be too much for you.
Close the Sale
Once the price is agreed upon, and you’re ready to move forward, you’ll need to pay and to take possession of the URL, which means having your name listed as the domain’s owner at the registrar. The tricky part is that when you’re buying from a private seller- there is no system in place for exchange of money and goods. Either one of you will have to trust the other first, or you need escrow.
Why Use Escrow When Buying a Domain Name?
The service that escrow provides is safety. This is because your escrow company doesn’t release payment for the URL to the seller until everything needed for full possession of the URL is received- seller’s ownership is verified, and it’s not locked into a host or registrar, there are no passwords missing, or other barriers.
This is how you protect your interest as both the buyer and seller of the domain name. If you have questions about how commercial escrow works, contact Bay Area Escrow.
Cryptocurrency transactions are new territory for many people. The smartest ways to use cryptocurrency, and safest ways to buy or sell with it, are all unfamiliar to most. But escrow is a solution that solves the risks of this tricky currency.
Bitcoin and other cryptocurrencies are not legal US tender. Although they have value and are welcome in many places, you have no legal obligation to accept payment in cryptocurrency. It’s up to you whether you’ll accept this kind of payment. Choosing to embrace the cryptocurrency option creates more potential buyers or sellers for you.
How Does Cryptocurrency Work?
Explaining cryptocurrency transactions is no easier than explaining other currency systems (do you know how the US dollar bill’s value is created and why it fluctuates?). The basics are explained well here: Bitcoin Explained So That a Five Year Old Would Understand.
How Does It Fit Into Your Transaction?
Whether you’re hoping to buy with cryptocurrency, or accept crypto payment, be sure that you understand how the process works. Be aware of your options for converting to or from other currencies if that’s your plan.
There is a unique problem that comes with this kind of transaction: should be the buyer trust the seller and pay before receiving the business or should the seller trust the buyer and turn over the business before receiving payment? The solution is using a third party escrow service.
What Could Go Wrong Without Escrow?
Cryptocurrency exchanges are not reversible. This is a built-in feature of cryptocurrency transactions, and it also means that if you participate in a transaction where bitcoin or another cryptocurrency is bought, sold, or changes hands, it is irreversible. Escrow makes transactions safe by being a third party, ensuring goods and payment both are received before the transaction completes.
For help navigating your cryptocurrency transaction, contact Bay Area Escrow today.
If you’re thinking about selling a business in California, you’ll need to do some planning first. To start, you’ll need a clear understanding of your business’ competitive position. It may take effort to establish an appropriate price, and to investigate a buyer’s suitability before sitting down to negotiate.
Selling your business may not be as easy as you’d think, and you’ll need to really dive deep into the accounting books, update old operating systems, and organize messy storage if you want to really command a high asking price.
As you plan on selling a business in California, here are some things to consider:
1. Establish the Value of Your Business
It’s wise to hire a third-party to calculate a realistic estimate of what the current business value is. Hiring a qualified professional to review the business will give you a better understanding of how much you should ask for. Often emotions or value placed on an expected future prevent a business owner from seeing the current monetary value of their own business clearly. Getting an outside perspective will help you understand the strengths and weaknesses of your business in a new way.
2. Clean Up Finances
Prospective buyers want transparency and will invariably look into a business’ financials when buying. Avoid any red flags by having an accountant organize the books for at least the last three years to make sure all income and expenses are accounted for. The accounting doesn’t just need to be accurate, it also needs to be easy for new eyes to understand.
3. Increase Sales
Buyers want to buy a business that’s successful! So take action to boost your sales as much as possible. Do what you can to increase your revenue and reduce inventory to make the business look optimally desirable to potential buyers.
4. Have a Change-Over Plan
Plan how the handing over of the business would go ideally. What time of week or month would be best for the official changing of hands? Why? What guidance will you need to offer new owners so that employee pay and benefits aren’t disrupted, security and alarms aren’t a barrier, and other aspects of the switch go smoothly?
5. Work with Professionals
If you really want top dollar, you’ll want to make sure you have a team of professionals in your corner. Find a business broker to help locate the right buyers. Also, work with a trusted escrow company to ensure all paperwork is correct and you’re protected from fraud when the sale closes. Don’t take risks you don’t have to.
For guidance on your business selling adventure, call Bay Area Escrow at 925-831-9099.