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.