OT: stupid question, Escrow? Options

[SirAndy]

How exactly does Escrow work? (IMG:style_emoticons/default/idea.gif)

from what i gather, the escrow company is kinda like a Notary with a Bank and i put in the funds and they'll hold them until certain terms in the sales contract are fulfilled and then release the funds to the seller ...

am i close?
(IMG:style_emoticons/default/shades.gif) Andy

[race914]

How exactly does Escrow work? (IMG:style_emoticons/default/idea.gif)

from what i gather, the escrow company is kinda like a Notary with a Bank and i put in the funds and they'll hold them until certain terms in the sales contract are fulfilled and then release the funds to the seller ...

am i close?
(IMG:style_emoticons/default/shades.gif) Andy

And then they transfer the ownership papers to you.

[HeavyHeavy]

More or less. It depends a little on the context.

Let's say you purchase a house on a real estate contract (as
opposed to a normal closing where you would receive a deed
right away). In a deal like that, the owner of the property
holds the note and is still on the hook for paying that
while the buyer on the real estate contract takes possession
and makes payments - usually to an escrow company. It is
the duty of the escrow company to accept the monthly
payments and either put it toward the owner's mortgage or
pay the owner so he can do it.

The escrow company is basically a disinterested third party
that makes sure both sides are getting a fair shake. In the
example of the real estate contract, the escrow company
holds a warranty deed and a special warranty deed. If the
buyer pays off the real estate contract, the escrow company
will make sure that the warranty deed from the seller to the
buyer gets recorded at the county clerk's office. If the
buyer defaults, the escrow company records the special
warranty deed from the buyer back to the seller.

An escrow officer usually works at a title company and not
an escrow company (at least here that's how it works). The
job of an escrow officer is to do the closing, but is still
just a disinterested third party that makes sure everyone
involved in the transaction gets a fair shake.


Jamie

[sww914]

Yes. They're the impartial money holders. After the title people verify that all of the 6' thick pile of paperwork is complete they will release the money. In the case of my home purchase they held on to the $4500.00 that was earmarked for the termite damage repair jerkoffs until I said that they could release it after 6 months. That's how long it took to get them to finish the job that they started. It had to do in part with them trying to bondo up a hole in the shower wall and for some reason I wouldn't accept that as a good repair.

[TROJANMAN]

My uncle in Nigeria has an escrow company that comes highly recommended. (IMG:style_emoticons/default/biggrin.gif)

But what they said. If this is a real estate transaction the escrow company, more or less, guarantees clear title and acts as a non-interested third party to facilitate the transaction.

[SirAndy]

not for real estate ...

i'm buying the liquor license from the previous owner and the transfer usually takes some time. i'm planning on putting the money for the license into escrow until the transfer of the license is completed.

i drafted up a agreement that states, among other things, that if (for whatever reason) the transfer does not complete, he'll get no money.


well, that's the plan anyways ...
(IMG:style_emoticons/default/biggrin.gif) Andy

[HeavyHeavy]

I'm sure it's the same concept then. The escrow company
will pay the previous owner the money that you put into
escrow when it determines that the liquor license can be
handed over to you without also handing over any problems
that the previous owner should take care of.

They need to make sure that you are not purchasing problems
along with your liquor license

[Pat Garvey]

Well, an escrow agreement is definitely NOT limited to real estate, liquor license agreements. An escrow agreement is a bond. You, by abiding by the agreement, have stated that you will pay a sum upon agreement of terms.

Yes, the agent is a third party, and they do collect a fee (though it's usually nominal). Escrow can be used for real estate, tax, liscense, fines (don't ask how I know about this one). You place a certain amount of funds with an agent, guaranteeing they are available to complete the transaction. Once all the terms have been met, you ask the agent (in writing) to release the funds. Deal done.

It's actually a pretty simple & inexpensive process. Everyone goes home happy.
Pat

[ericread]

not for real estate ...

i'm buying the liquor license from the previous owner and the transfer usually takes some time. i'm planning on putting the money for the license into escrow until the transfer of the license is completed.

i drafted up a agreement that states, among other things, that if (for whatever reason) the transfer does not complete, he'll get no money.


well, that's the plan anyways ...
(IMG:style_emoticons/default/biggrin.gif) Andy

Escrow is only as strong as the escrow contract. Speak to an ecrow company or two and ask them to provide contract documentation. Look for a company that provides commercial escrow services.

[rhodyguy]

the escrow co should provide info as to any liens. you don't want to be assuming anyone else's headache. do you have an attorney?

[DNHunt]

Just my opinion, If you are buying a business get an attorney.

Dave

[Cap'n Krusty]

Escrow protects both the buyer and the seller. If there's a cloud on the liquor license, the buyer is protected. If the buyer can't qualify for the license, the seller is protected (so's the buyer). You NEED a third party to handle that stuff for you so nobody gets burned, and the sale goes through smoothly and legally. BTW, you wanna be sure any plans you have for the establishment comply with the zoning laws and the conditional use permit, that you have a fictitious business name on file with the county, that you have your sales tax and business license requirements fulfilled, and that the city and the state will allow the transfer. Also that the seller doesn't have any undisclosed financial or legal baggage that will affect YOU after the sale. THAT'S what an escrow agent does for you. The Cap'n

[Katmanken]

And escrow says you are serious enough about the transaction to put up money, and not a tire kicker....

Ken

[SirAndy]

yes, i do have an attorney. i just wanted to make sure i understand how things work.
attorneys have the tendency to use a lot of words i am not familiar with ... (IMG:style_emoticons/default/rolleyes.gif)

i started a s-corp to run the club, been talking to the city about zoning, inspections and permits. got my attorney to review the agreements and contracts. just got off the phone with the escrow agent who handled the license transfer for the club in the past. no outstanding issues with the club or the previous tenant.

i might get hit with some additional sound proofing work to pass the cabaret license inspection. the city hinted at that, there have been noise complaints in the past from one neighbour (go figure, there's always that one guy) ...

anyways, everything looks good to go, talked to the previous tenant at length yesterday and got a lot of good info on the place.

plus, we sipped some of the over $10k of booze he had stashed in his garage. (IMG:style_emoticons/default/biggrin.gif)

(IMG:style_emoticons/default/stirthepot.gif) Andy

[yellow914]

in a business escrow it is typically handled by an escro company that specializes in licens transfer and also mobile homes as they are not real property (usually)

the ABC will no doubt want a rectal exame from both you and the seller to make sure there is no reason for them to not approve of this transfer...aaaaaalsoooo if you have any DUI's it could be more difficultbest of luck on your new business once to conquor the red tape...... (IMG:style_emoticons/default/beerchug.gif)