Commercial Real Estate Escrow

sale commercial property

Escrow and Selling a Business with Real Estate

Once the buyer and seller have been able to come together on the main deal points for the value and sale of the business and real estate, it’s time to open escrow to make sure the transfer happens in a smooth and coordinated way.

When the transaction involves both a business and real estate, it is typical to have two separate escrows – one for the business and one for the real estate.

Here is a summary of the steps to open and then successfully close each escrow.

1. Open Escrow

The first step in the Escrow process is to open an Escrow account. The buyer and seller will need to agree on the Escrow company and the Escrow officer who will manage the transaction. The Escrow officer will then create an Escrow account to hold the funds and documents related to the transaction.  We have found working with Cynthia Moller at Glen Oaks Escrow a very positive experience.

2. Review Purchase Agreement

The Purchase Agreement is a legally binding document that outlines the terms of the sale, including the purchase price, closing date, and any contingencies. It is important for both the buyer and seller to review the Purchase Agreement carefully to ensure that it accurately reflects their understanding of the transaction.

3. Conduct Due Diligence

Due diligence is the process of investigating the business and real estate to ensure that they are as represented by the seller. This can include reviewing financial statements, leases, contracts, permits, and other documents. The buyer should also conduct site visits and inspections to identify any potential issues.

4. Obtain Financing

If the buyer needs financing to purchase the business and real estate, they will need to obtain pre-approval from a lender. The lender will require documentation to assess the buyer’s creditworthiness, such as tax returns, bank statements, and financial statements.

5. Title Search

A title search is conducted to verify that the seller has a clear title to the real estate and that there are no liens or encumbrances on the property. The Escrow officer will coordinate with a title company to conduct the search and obtain a title report.

6. Obtain Title Insurance

Title insurance is a type of insurance that protects the buyer and lender from losses due to defects in the title. The buyer will need to purchase title insurance to protect their investment which the escrow company should assist with.

7. Obtain Commercial Real Estate or Property Insurance

The buyer will need to obtain insurance to protect the property from damage or loss. The lender will require proof of insurance before funding the loan.

8. Conduct Environmental Assessments

If the property has a history of environmental issues or is located in a high-risk area, the buyer may need to conduct environmental assessments to identify any potential liabilities. This can include testing for hazardous materials or conducting a Phase I or Phase II Environmental Site Assessment.

9. Obtain Permits and Licenses

The buyer will need to obtain any necessary permits and licenses to operate the business. This can include business licenses, zoning permits, and health permits.

10. Review Lease Agreements

If the property includes leased space, the buyer will need to review the lease agreements to understand the terms and conditions of the lease. This can include rent payments, lease terms, and options to renew.

11. Coordinate Closing Documents

The Escrow officer will coordinate the preparation of all closing documents, including the bill of sale, deed, and closing statement. The buyer and seller will need to review and sign these documents before the transaction can close.

12. Attend Final Walkthrough

The buyer should conduct a final walkthrough of the property before closing to ensure that everything is accurately represented by the seller. This can include checking for any damages, verifying that all equipment is in working order, and confirming that all required items are included in the sale.

13. Transfer Utilities

The buyer will need to coordinate the transfer of utilities, such as gas, electricity, and water, to their name immediately after escrow closes.

14. Prepare Closing Funds

The buyer will need to prepare the closing funds, which can include the down payment, loan proceeds, and closing costs. The Escrow officer will provide a breakdown of the closing costs and the amount due at closing. If the buyer is obtaining third-party finance, this is also coordinated with the Escrow officer.

15. Close Escrow

Once all of the documents have been signed and the closing funds have been deposited, the Escrow officer will close the sale.

Note:  The seller’s net proceeds, or a portion of the seller’s net proceeds may be held at the close of escrow on the business assets only not the sale of the real estate, pending receipt of tax clearance certificates.  To learn more about escrow and tax clearance certificates, click here.

Once the buyer and seller have been able to come together on the main deal points for the value and sale of the business and real estate, it’s time to open escrow to make sure the transfer happens in a smooth and coordinated way.

Certified Machinery and Equipment Appraiser

Andrew Rogerson; Sacramento, CA

is a business owner of 39+ years.  This includes successfully owning and operating 5 businesses.  Andrew is a Certified Mergers & Acquisition Professional (CM&AP), Mergers & Acquisition Master Intermediary (M&AMI), Lifetime Certified Business Broker (LCBB), author of 4 books, and he gives speaking presentations on request.

Andrew helps business owners with a business in California, value and sell their business in the Lower Middle Market or with a value from $1m to $50m.



    5150 Fair Oaks Blvd, #101-198
    Carmichael, CA, 95608-5788


    Phone: (916) 570-2674
    Fax: (916) 473-8655


    Buying or selling a business is a complex process – and you shouldn’t go through it alone. You need an experienced business broker to guide you through the process.

    We make buying and selling businesses simple and straightforward. We’re qualified to handle the most complicated aspects on behalf of our clients, ensuring you walk away satisfied.