Postings Advertise Resources Blog Discussions About Us Register Login BizBen Podcast   BizBen Podcast
500 New & Refreshed Posts, Postings Daily
Over 8,000 Postings & 2,500 Resources
Assisting Buyers & Sellers Over 25 Years!


Escrow, Bulk Sale Closing Fees And Costs - What Do They Include?

Comments & Feedback From Pro Intermediaries & Pro Advisors On BizBen:

A couple newer business brokers asked me during a consulting session recently what I thought the escrow process costs and if there is a large variation amongst escrow or closing companies when it comes to closing fees in California?

Here was my response back to these brokers:

There is no such thing as a typical cost of an escrow on a business sale.

The buyer and seller will pay a total of a few hundred, or thousands of dollars to the escrow company that handles closing of the transaction. There are a number of factors that contribute to the cost of the escrow. The basic fee charged by the escrow company for preparing the paperwork, conducting a session at which all documents are signed, distributing copies of relevant documents to the right parties, calculating the amount of payments and processing the payments to creditors, government agencies (for filing fees and registration costs), brokers and others who have a stake in the transaction.

A rule of thumb is to expect that the basic fee will be calculated on the basis of the selling price, and often is between seven and nine tenths of a percent of the selling price. In practical application, that would mean a base fee of between $700 to $900 involving a $100,000 business transfer.

There may be extra costs for services rendered by the escrow company, in an amount of $200.00 to $750.00 depending on the number of hours needed to prepare all documents and notify interested parties of their financial rights and obligations in connection with the deal.


I would like to see comments on your experiences with fees and costs of escrow companies on the close of a business sale transaction. Share with BizBen Members and Users about your experiences with comments and replies above.


Contributor: Transactional Attorney   Comment # 967
I often have buyers and sellers ask me if escrow is really needed, and I can't emphasize enough how valuable (and cost-effective) a good escrow agent can be in a small business sale.

Especially given that most transactions split escrow costs, your escrow costs will include many items that would cost much more if you had your attorney handle them. My advice is to let escrow handle what they focus on as Tim and Peter have outlined.

The one item that your legal counsel should focus on with regard to escrow is to review the escrow instructions independently. Escrow agents may have counsel on staff, but are not typically attorneys themselves. I've seen multiple times where escrow added clauses or provisions that would have a material impact on a contract, but buyers and sellers often think they are just signing boilerplate language.

A mention should be made of some of the more important things the escrow agent does to protect the buyer:

1. Check that all sales taxes have been paid and clearance received from the Board of Equalization
2. Check that all employment taxes have been paid and clearance received from the State of California
3. Check that there are no UCC-1 security agreements (liens) filed against any tangible assets being purchased.
4. Prepare, record, and publish the Bulk Sales Transfer notice to protect the buyer against business creditors.
5. Collect the sales tax from the buyer on the fair market value of the FF&E being purchased.
6. Prepare a proper Bill of Sale.
7. Assure the smooth transfer of the lease on any premises.
8. Hold the buyer's funds in escrow until all the seller's obligations are completed, including the delivery of a signed Bill of Sale.

Contributor: Business Broker, Northern California   Comment # 766
The services of a good escrow company can make or break a deal. The escrow company that does business acquisitions is totally different to the escrow company that does residential sales or commercial real estate transactions. I'm based here in Sacramento and I only know of 3 companies that do escrow for business acquisitions. There are many escrow companies that do residential transactions. If the sale of a business includes both a business and real estate that is a more complicated escrow because there are title searches, title insurance and other costs that are specific to real estate. If its a business and the transaction includes inventory then the bulk sale law applies. If its a service business the bulk sale law doesn't apply. If you are buying a business in CA remember you may have to pay sales tax on the value of the Fixtures, Furniture and Equipment with your escrow company able to give you that amount.

The right escrow agent can make all the difference in the world to a successful transaction. Generally, the buyer will technically designate the escrow agent; however, the business broker (generally representing the seller) is the best resource for knowing which one to use. Our standard purchase agreement includes a section designating the escrow agent; but, the buyer has every right to ask the broker why a particular escrow agent is specified. The factors that count are experience, attention to detail, consistency, and, most importantly, calm professional demeanor in the face of the inevitable "closing from hell" where one party (or both) is totally unreasonable.

Other Related Blog Posts, Articles, And Discussions You May Be Interested In

3 Car Wash Types To Purchase Buying A Car Wash Business: 3 Successful Types Of Car Washes To Consider

One of the most popular business searches (and eventual business purchase) on BizBen is the self serve and full service car wash. Peter Siegel, MBA (ProBuy & ProSell Programs Director) with reflects on three types of car wash models and what buyers should look for in a car wash purchase.
Pocket Listings Pocket Listings: Vast Hidden Market Or Myth With Business Buyers & Sellers?

What percentage of businesses for sale that are advertised and/or sold are pocket listings? What is the best way to find out about pocket listings? Are they advertised? Are they a big part of the businesses sold marketplace? In this Discussion ProIntermediaries and ProAdvisors discuss this topic.
Business Buyer Feedback On Postings 8 Items Buyers Of Small Businesses Find Critical When Reviewing Businesses

In this month's Business Buyer survey for, we asked participants in our ProBuy Program and 250 other random business buyers what they look for and avoid when looking at a business for sale postings online. Of the 20 potential posting characteristics we asked about, 8 stood out with most.
Buying A Business Losing Money Should I Buy A Small Business That is Losing Money? Brokers & Agents Discuss

When considering buying a business that is losing money one has to be very careful. There are reasons that the business could be losing money that aren't fatal or extremely difficult to fix and there are other reasons that should send you running in the other direction. ProIntermediaries discuss.
Buying An Absentee Small Business The Pros And Cons Of Buying An Absentee Run Small Business In California

Peter Siegel, MBA - BizBen Founder discusses the difference between a hands on owner and an absentee owner. It covers why someone would want to be an absentee owner and then goes on to discuss the pros and cons of buying an absentee run small business in the California marketplace.
Are Upfront Fees Worth It In Defense Of Upfront Broker Fees: Why Owners Should Pay Brokers Upfront

Are up front fees worth it? In this BizBen Blog post Brian Loring (Business Broker) discusses the pros and cons of owners of small businesses paying business brokers and agents an upfront fee for their services. There are many sides and opinions expressed on this topic by both sellers & brokers!
Key Factors Play A Role When Selling When To Sell Your Small Business - Many Key Important Factors Play A Part

Determining the right time to sell a private business is as much an art as a science, because there are so many factors at play and each business is unique. The timing of a business sale is critical. Christina Lazuric, CBI, Orange County Business Broker discusses this topic on this BizBen Blog post.
Unreported Income Claims By Sellers Unreported Income Claims By The Seller - What Should A Business Buyer Do?

One of the most difficult challenges when purchasing a small business is expressed by this prospective buyer of a liquor store who is told by the seller that there is more money being made than shows up on the books. Should the buyer accept that statement by the seller & go ahead with the purchase?
Curb Appeal Selling A Business Does Curb Appeal Really Help Sell Small Businesses? Brokers & Agents Discuss

This post is essential reading for any prospective business seller. Curb appeal is critically important, not just to the amount of the final sale price, but also to whether there will be a sale at all. Top ProIntermediaries and ProAdvisors discuss this valuable topic on this Discussion.
Buying A Janitorial Service Janitorial Cleaning Services: 6 Considerations When Buying A Janitorial Firm

Buyers interested in buying a janitorial cleaning business will find companies in this industry for sale that are quite profitable. Careful due diligence, including the six factors covered in this blog post, is advised before completing a deal. Peter Siegel, MBA with BizBen explores this industry.