Share This Info:  

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

See All Discussions   •   See All Contributors   •   All New Discussions & Comments

Comments & Replies: 5     Views: 9988     Posted By: Peter Siegel MBA  Peter Siegel MBA: BizBen Founder, ProBuy/ProSell Program Director



Topics: Buying A Business, Escrow Closing Issues, Selling A Business     Tags: buying a business, escrow bulk sales, liquor license, selling a business



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.

Thanks.


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.

Contributor: Business Broker, Northern California

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.


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: Transactional Attorney

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.


  Helpful Resources To Assist In Selling And Buying California Businesses
Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Brad Steinberg, Broker - Laundromat Specialists

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Joe Sandbank, Esq. - Legal Services

I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
Is There Such A Thing As Paying Too Little When Buying A Small Business?

We all understand the idea of paying too much for a small business. But is there such a thing as not paying enough? That seems like an odd notion, but I'm familiar with situations in which a buyer acquired a small business for a figure substantially under what probably was market value.

Tips For Faster SBA Loan Approvals For California Small Business Purchases

In this article on BizBen, business purchase financing advisor and SBA loan broker, consultant Peter Siegel (Business Purchase Financing Expert/Advisor & the ProBuy Program Director at BizBen) at 925-785-3118 shares his views of getting SBA loan financing faster for business purchase financing.

Why Deals Fall Out: Unrealistic High Asking Prices Are Usually The Reason

The unfortunate truth is that approximately 50% of all small business sales transactions fall out. While failed transactions can happen for a many reasons, Peter Siegel, MBA (BizBen Director & Business Purchase Financing Expert) discusses the main reason deals fall through; steep asking prices.

Absentee Run Small Businesses - Is That Really A Possibility For Buyers?

Is buying a absentee run small business really a possibility? Peter Siegel (BizBen ProBuy Director) gets asked this question a lot in his consulting sessions with business buyers. Read more about what other Advisors and Intermediaries feel about this topic on this popular BizBen Discussion!

How To Determine Whether The Buyer For Your Business For Sale Is Sincere

A problem owners encounter when offering a CA business for sale is that not all so-called business buyers are qualified to make the purchase. It's frustrating and costly to waste time showing non-qualified buyers the business. Here are ways to identify time wasters so the focus is on real buyers.

Thinking Of Selling My Business: What Factors Create Value And Drive Price?

There are a lot of misconceptions about what enhances the value of a business. The following factors in this Discussion Post on BizBen are aspects of a business that really drives its value and pricing. Business owners thinking of selling should check these out these factors before selling.

Selling A Business Without Getting Sued: 5 Tips For Business Sellers/Brokers

How do I sell my business without getting sued, isn't a subject just for discussions with lawyers. A seller can take some precautions to reduce potential legal problems. Peter Siegel, MBA Founder Of BizBen and BizBen's ProSell Program discusses this topic for business owners/sellers and brokers.

What Is The Typical Business Broker Fee For Sellers And Buyers? Who Pays It?

Was just asked the question from a business owner what the "typical commission" amount is for a broker or agent and if upfront fees are common? Thought this might be a great Discussion topic on BizBen for both business owner/sellers and potentially for business buyers (buyer representation).

See All News, Tips And Events

Business Purchase Financing SBA Loans
Tim Cunha Business Brokerage
Joe Sandbank
Golden State Laundry System Laundry Business Brokers
Facebook
Twitter
Linkedin
Google Plus You Tube
Vlogs and Podcasts


Auto Related
Business Services
Children Related
Communication Related
Computer, Internet Related
Construction Related
Entertainment Related
Financial Services
Health, Beauty Related
Home Improvement Related
Maintenance Related
Manufacturing Related
Media, Publishing Related
Pet Related
Photography/Video Related
Real Estate Services
Restaurant, Food Related
Retail Related
Service Related
Sports Related
Transportation Related
Travel Related
Wholesale Related

Auto Body Shops
Auto Repair Shops
Bakeries
Bars, Sports Bars
Cafe Restaurants
Car Washes
Cleaning Services
Clothing, Apparel Stores
Coffee Shops
Convenience Stores
Deli Restaurants
Discount, Dollar Stores
Dry Cleaners
eCommerce Websites
Fast Food Restaurants
Florists, Flower Shops
Full Service Restaurants
Gas Stations
Gift Shops
Gyms, Fitness Facilities
Home Health Agencies
Hotels/Motels
Ice Cream Shops
Juice, Smoothie Shops
Laundromats
Liquor Stores
Markets, Marts
Nightclubs
Pizza Restaurants
Postal, Shipping Stores
Preschools, Day Care
Print Shops
Salons, Beauty Shops
Sandwich Shops
Smog Test Only Shops
Smoke Shops
Spas, Med Spas
Sushi Restaurants
Tire Shops
Towing Services
Vending Routes
Wireless, Cellular Shops
Yogurt Shops

Alameda
Alpine
Amador
Butte
Calaveras
Colusa
Contra Costa
Del Norte
El Dorado
Fresno
Glenn
Humboldt
Imperial
Inyo
Kern
Kings
Lake
Lassen
Los Angeles
Madera
Marin
Mariposa
Mendocino
Merced
Modoc
Mono
Monterey
Napa
Nevada
Orange
Placer
Plumas
Riverside
Sacramento
San Benito
San Bernardino
San Diego
San Francisco
San Joaquin
San Luis Obis
San Mateo
Santa Barbara
Santa Clara
Santa Cruz
Shasta
Sierra
Siskiyou
Solano
Sonoma
Stanislaus
Sutter
Tehama
Trinity
Tulare
Tuolumne
Ventura
Yolo
Yuba

0 to $99,999
$100,000 to $249,999
$250,000 to $499,999
$500,000 to $999,999
$1 million to $2 million
over $2 million




BizBen - Where California Deals Get Done! 925-785-3118
7172 Regional Street #364 · Dublin, CA. 94568
BizBen · Copyright © 1994 - 2019, All Rights Reserved

               Vlogs and Podcasts  
Join Us On Social Media - Content Updated Daily
Sign Up Today - For Our FREE BizBen Weekly Email Newsletter
Includes The Best Info On Buying, Selling, Valuing, Financing California Businesses:
Articles, Blog Posts, Podcasts, Videos/Vlogs, Discussions, Q&A, Workshops, Webinars,
Resources. Watch For An Email Confirmation After Signing Up Above. Thank you.
Clost Login


Please confirm your registration by clicking the link we've sent to .

If you can't see it, please check your junk mail folder.

If you have any problems registering, or need assistance with your new BizBen User Account please phone BizBen Customer Support at 888-212-4747.



First Name:*
Last Name:*
Email Address:*
Confirm Email:*
Create Password:*
Confirm Password:*
Phone:
(   
 


You Are A:
Individual
 
Intermediary
 

Email Address:
Password:
 
Search BizBen.com

500 New & Refreshed Detailed Postings Daily
Over 2500 Resources Available On BizBen
Since 1994. Where California Deals Get Done!
Top 100 List: This Week's Top Motivated Business Buyers & Their Requests...
Read More News
If You Plan To Offer Seller Financing: 3 Things Owner Sellers Need to Kn...
Read More News