Many insurance agency purchases are completed without an Escrow Company. While that’s fine if both buyer and seller have completed transactions in the past, first timers should consider using an escrow company. An Escrow Officer can outline your letter of intent into Escrow instructions. This will help your transaction stay organized and make sure everyone is handling their respective contingencies. They’ll also specify buyer and seller instructions to act as a guide for your transaction. One of the biggest benefits to using an Escrow Company is
their ability to file the necessary paperwork with the state, obtain releases from the County Tax Collector, Franchise Tax Board and EDD. They’ll calculate pro rata adjustments for taxes, insurance, rent, leases and other transfers. (It’s best to close on the 1st of each month so no pro rations occur, but sometimes they can’t be avoided).
As you go through the due diligence process, you can check off contingencies and Escrow can keep track of everyones progress.
Escrow companies will also hold any earnest money or deposits in an escrow account. This protects both buyer and seller in the event the sale doesn’t close. The fees to open an escrow account are worth their weight in gold. Don’t compare the escrow to that of a home escrow. There’s no title insurance to buy and the fees for escrow are disclosed before the account is ever opened.
As I said earlier in the post, most transactions are closed without an escrow. We’re big advocates of using them depending on the buyer, seller and circumstances of your particular sale. As you research the process of selling your insurance agency, add using an Escrow Company to the list.
As always, feel free to contact us if you have any questions about the process of selling your insurance agency.