- 24 Feb 2020
- Jet Tolbert
- Aircraft Ownership
What to Know When Choosing an Escrow Agent
Does an escrow fund always have to be used? Is there such a thing as a bad escrow fund, and are there common scams to avoid? Aircraft broker Jet Tolbert shares background information with some industry insights…
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Jet Tolbert
Jet Tolbert is president of Florida-based American Aircraft Sales where he oversees all aspects of aircraft...
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It is hard to come up with reasons not to use escrow when buying or selling a business aircraft. An established, industry-accepted escrow based in Oklahoma City will have vast experience that it’s accumulated from completing multiple transactions yearly for both US and international customers.
Such companies handle the title work as well as the funds and filings at the FAA, while acting as an intermediary to the buyer and seller, ensuring funds and document transfers are handled per a fully executed and verified aircraft purchase and sale agreement.
You are unequivocally advised to use a well-vetted escrow company that your aircraft broker and legal team can agree on. Anything less than that, however, would carry huge amounts of risk.
Following are some tips for you to keep in mind when working with an escrow agent. While we cannot cover every angle within the scope of this article, the following should provide guidance on how business aircraft brokers and aviation attorneys will work with the escrow agent to manage your risk and protect your interests.
Escrow Agreements: Verify the Policy
The escrow company should have a standard procedure in place (and verified) that all deposits remain refundable to the depositor unless notified otherwise. Notification should be in writing or with a signed aircraft purchase and sale agreement.
While it is good to verify this policy before sending a deposit, you should also consider adding a consent and joinder, tying the escrow agent directly into the purchase and sales agreement.
This extra step will often secure the deposit more closely, especially when there are multiple parties to a transaction or an intermediary is involved in the contracting, and the deposits need to be clearly tied from one end of the deal to the other.
Escrow: What are the International Considerations?
Buyers and sellers based in the United States or the European Union are subject to liens in Ireland. There are currently 72 states which agreed to the International Registry of Mobile Assets in Dublin, Ireland taking precedent over the FAA (or other local) lien registry. The title company will check the International Registry and make any filings, if needed, in addition to those at the FAA.
It is noteworthy that many international transactions will still use an Oklahoma City-based escrow for funds, even where both parties are from outside the US.
Escrow Funds: Look out for Scams!
Never pay upfront for escrow fees. There was a time when a Nigerian company set up a fake escrow to induce sellers to agree to sell at a price using the escrow in the UK. The catch was that the seller had to pay up-front fees to open escrow before the buyer would send funds.
Don’t fall for it!
As stated above, many international buyers and sellers turn to Oklahoma City escrow agents for funds management.
Additional security considerations, such as hacking, can be mitigated by using an escrow agreement whereby the agent verifies all wire instructions by telephone prior to sending. Hackers are gaining access to more emails lately, and have been known to wait until the last minute to send an email from the victim’s own email address issuing a change in wire instructions.
One final consideration is corruption, and specifically the ‘Know Your Customer’ procedure.
The end parties in a transaction are often unable to vet the customers to the level that the Federal banking system will. While an escrow company is not a guaranteed security blanket it certainly helps to have another link in the wire transfer chain, where the escrow bank and the Federation will help act as a barrier to prevent funds moving to or from questionable sources.
How to Pick the Best Escrow Agent
Escrow agents are high volume and don’t work as any one party’s agent. The best escrow companies will move large volumes and have exceptional experience and efficient processes that help your transaction go smoothly. But you have to be on your game, too.
As highlighted above, you need to take care when working with the best escrow agents to make sure that your transaction is protected from start to finish. Only your well-honed acquisition team can ensure this.
More information from www.americanaircraftsales.com
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