Commercial property transactions are notoriously risky for both buyers and sellers. These deals often take months or even years to finalize – which leaves plenty of time for issues to arise. Additionally, the typical size of a commercial real estate transaction and the fact that they occur between business entities further increases complexity and, therefore, risk.
Fortunately, business escrow services were created to reduce transactional risk for large, lengthy, and complex transactions. With escrow, your business can approach a commercial property deal with the assurance that you are protected throughout the transaction.
How Does Escrow Help Buyers of Commercial Property?
When buying a commercial building, your company will typically need to set aside the funds to complete the deal well before the final paperwork is signed. These funds legitimize the transaction and prove to the seller that you can complete the purchase when the time comes. The escrow agent holds your money securely, ensuring it is protected from external factors like bank failure that could jeopardize your financial position and the purchase.
Escrow also protects your company from unscrupulous sellers who could otherwise hide information, collect payment without upholding their end of the bargain, or rush the sale to conclusion. The escrow agent does this by acting as a neutral third party that holds funds securely until all contract terms are met – ensuring the seller upholds their end of the bargain before receiving payment.
Utilizing escrow also gives you time to complete comprehensive due diligence including collecting environmental reports, deeds, surveys, and other important documentation that could impede the sale. If issues arise with the property during due diligence – whether they are the fault of the seller or not – you can receive your money back according to the terms of the contract.
How Does Escrow Help Sellers of Commercial Property?
When selling commercial property, you need assurance that the buyer is invested in the transaction and can complete their end of the bargain when the time comes. An escrow agent helps alleviate these risks by collecting payment from the buyer upfront so you can confirm they are serious about the purchase.
In addition to collecting payment, the escrow agent releases the funds promptly after the sale concludes and ensures you receive the money you are owed without delay. If the sale falls through, you can still receive compensation for lost time and effort according to the terms of the contract.
Escrow also keeps the buyer’s funds separate from operating expenses, which is important during a lengthy due diligence period. This separation ensures that the buyer’s financial position in relation to the sale is the same at the beginning of the transaction and the end.
How To Choose an Escrow Agent
There are many escrow agents, but all are not created equal. To get the most benefit from escrow, you first need to ensure that your agent has a strong track record. You can judge this based on testimonials from past clients, reputation in financial circles, and the length of time an escrow agent has been in business.
In addition to past performance, you need an escrow agent that offers the strongest protection for cash. Your escrow agent should provide access to government insurance for all escrow funds – even those above the $250,000 FDIC limit.
Protect Your Company During a Commercial Property Transaction with Escrow From ADM
At the American Deposit Management Co. [ADM], our business escrow services reduce risk for both buyers and sellers in commercial property transactions. When you partner with us, you will have access to government insurance for all escrow funds – even for transactions well above the FDIC or NCUA limit.
In addition to extended safety for escrow funds, we offer unparalleled customer service that makes the escrow process a breeze. Our team specializes in escrow for businesses and has decades of experience ensuring commercial transactions occur seamlessly.
To learn more about what makes our escrow services unique, contact one of our friendly associates today.
*American Deposit Management Co. is not an FDIC/NCUA-insured institution. FDIC/NCUA deposit coverage only protects against the failure of an FDIC/NCUA-insured depository institution.