Business Escrow Agents
What is an Escrow Agent & What Do They Do?
Escrow agents serve as the neutral "stakeholder" and, the communications link to all parties in the sale of a business. Escrow agents are licensed by the Department of Corporations, Division 6 of the California Financial Code.
The California Escrow Law protects members of the public who entrust their money or other assets to independent escrow agents. Escrow agents are subject to the provisions of the Escrow Law.
The Escrow Law defines "escrow agent" as any person engaged in the business of receiving escrows for deposit or delivery.
Finally, the Escrow Law defines "escrow" as "any transaction wherein one person, for the purpose of effecting the sale, transfer, encumbering, or leasing of real property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by such third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by such third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter."
The Escrow Law requires any person engaged in the escrow business in California to be a corporation organized for that purpose and to be licensed by the Commissioner.
What the Escrow Agent does:
1. Prepares escrow instructions and amendments. Escrow instructions will be either mailed directly to the Buyer and Seller, or given to the selling broker for distribution, the choice is up to the selling broker. The instructions will reflect what is in the terms of the offer. If applicable, the instructions will include a Notice to Creditors of Bulk Sale.
2. Requests publication, recording and UCC lien search
3. Requests a beneficiary's statement if debt or financial obligations are to be taken over by the Buyer
4. Complies with lender's requirements, specified in the escrow agreement
5. Receives purchase funds from the Buyer
6. Prepares or secures the loan or other documents related to escrow.
7. Prorates taxes, interest, rents, security deposit
8. Secures releases of all contingencies or other conditions as imposed on any particular escrow
9. Records UCC-1 and UCC-3, if necessary
10. Closes escrow when all the instructions of Buyer and Seller have been carried out
11. Disburses funds as authorized by instructions, including charges for real estate commissions and payoff liens.
12. Prepares final statements for the parties accounting for the disposition of all funds deposited in escrow.