6 Steps to Prepare for Escrow Closing
To prepare for escrow closing, gather corporate documents, clear all liens, update asset schedules, secure third-party consents, review escrow instructions, and confirm wire instructions. Completing these steps before the closing date prevents last-minute delays and ensures a smooth fund release.
Closing day should be a celebration. The buyer gets the business. The seller gets the money. Everyone signs the final documents and moves on. In reality, closing day is often a scramble. Someone forgot to sign a corporate resolution. The UCC termination statement was never filed. The wire instructions are wrong. The landlord still has not returned the lease assignment. At Secured Trust Escrow, we have seen closing day disasters that were entirely preventable. Here are six steps to prepare for escrow closing so your deal finishes on time and without drama.
1. Gather and Review All Corporate Documents
Start with the basics. If you are the seller, collect your articles of incorporation, operating agreement, bylaws, and any amendments. Review them to confirm who has authority to sell. If you are a corporation, draft a board resolution authorizing the sale and naming the officers who will sign. If you are an LLC, get written consent from all members. If you have a partner who is not involved in day-to-day operations, contact them now. Do not wait until the day before closing. The escrow company will review these documents to verify authority. If they find a problem, closing stops until it is fixed. Also review your minute book. Make sure your corporate records are current and that you have not missed any required filings. A suspended corporation cannot legally transfer assets.
2. Clear All Liens and Obtain Payoff Letters
Order a UCC search immediately after signing the purchase agreement. Do not wait for the buyer to do it. If the search reveals liens, contact each secured lender and request a payoff letter. Ask the lender to file a UCC-3 termination statement upon payment. If you have tax liens, contact the IRS or the state tax agency and negotiate a release. If you have judgment liens, contact the creditor and settle or obtain a release. The escrow company will not release funds to you if liens exist on the assets being sold. They will either pay the liens from the purchase funds or hold the funds until you clear the liens. Getting ahead of this step saves weeks. Lenders are slow. Government agencies are slower. Start now.
3. Update the Asset Schedule and Conduct a Physical Count
The asset schedule in your purchase agreement is probably outdated. Equipment gets sold. Inventory gets used. Vehicles get traded. Update the schedule to reflect the actual assets that will be transferred at closing. Include serial numbers, model numbers, and current condition notes. If you have sold any scheduled assets since signing the agreement, disclose it now and adjust the purchase price or replace the assets. Conduct a physical inventory count with the buyer or an independent third party. Document the count with photos and signed receipts. The buyer will inspect the assets before closing. If the inspection reveals missing or damaged items, closing will be delayed while you negotiate a credit or replacement. An accurate schedule prevents this.
4. Secure All Third-Party Consents
Identify every contract, lease, license, and permit that requires third-party consent for transfer. Contact each party and request consent in writing. This includes landlords, vendors, customers with exclusive contracts, franchisors, and government agencies. Do not assume consent will be quick. Landlords often take two weeks to review a new tenant’s financials. Franchisors may require training or background checks. Government agencies may need 30 days to process a license transfer. Start these conversations the day you sign the purchase agreement. Provide the third parties with everything they need: financial statements, credit reports, application forms, and references. Follow up weekly. If a third party is unresponsive, escalate through your attorney or broker. The escrow company cannot close without these consents if the instructions require them.
5. Review and Approve the Escrow Instructions
The escrow instructions are the rulebook for your closing. Read them carefully. Make sure they match the purchase agreement. Verify the purchase price, the deposit amount, the closing conditions, and the default provisions. Check the timeline. Confirm the inspection deadline, the financing contingency, and the closing date. If something is wrong or missing, speak up now. Do not wait until closing day to discover that the instructions say something different from what you agreed to. Both parties must sign the same version of the instructions. If your attorney made changes that the buyer’s attorney has not seen, resolve the differences before closing. The escrow company follows the instructions exactly. They do not interpret ambiguity in your favor. Clear instructions prevent disputes.
6. Confirm Wire Instructions and Closing Logistics
Wire fraud is real. Criminals intercept emails and send fake wire instructions. If you send your closing funds to the wrong account, you may never recover them. Confirm your wire instructions directly with the escrow company by phone using a number you verified at opening. Do not accept wire instruction changes via email alone. Provide the escrow company with your receiving account information early so they can verify it independently. Confirm the closing logistics: when and where documents will be signed, who needs to be present, and whether remote notarization is available. If you are traveling on closing day, arrange for a power of attorney or remote signing. The escrow company cannot close if a required signer is unavailable. Plan ahead.
Frequently Asked Questions
What if I discover a lien I did not know about?
Contact the lienholder immediately. Request a payoff amount and a release. If the lien is invalid, you may need an attorney to dispute it. The escrow company can pay the valid lien from the purchase funds at closing if the lienholder provides a payoff letter. Do not hide the lien. It will surface during due diligence, and hiding it destroys trust and may give the buyer a right to terminate.
Can I use a power of attorney for closing?
Yes, but the power of attorney must be specific, notarized, and acceptable to the escrow company. The escrow company will review the POA to confirm that it grants authority to sign the specific documents required for closing. A general POA may not be sufficient. If you plan to use a POA, provide it to the escrow company at least one week before closing for review.
What if a third party refuses to consent?
If a required third-party consent is refused, the deal may be in jeopardy. The purchase agreement should specify what happens if a consent is not obtained. Typically, the buyer has the right to terminate and receive their deposit back. Alternatively, the parties may negotiate a workaround, such as a new lease instead of an assignment. The escrow company follows the instructions. If the instructions say the deal is contingent on consent and consent is not obtained, the escrow is canceled.
Should I attend closing in person?
If possible, yes. In-person closing allows you to review the final documents, ask questions, and resolve any last-minute issues immediately. If you cannot attend in person, remote online notarization may be available. The escrow company can coordinate remote signing. Make sure you have reliable internet, a valid ID, and a quiet space for the notarization session.
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About the Author: This guide was prepared by the escrow officers at Secured Trust Escrow, a California DFPI-licensed escrow company with experience in business escrow closing preparation, document coordination, and secure fund disbursement for transactions throughout Los Angeles and surrounding areas.
Legal and Regulatory Disclaimer: This article provides educational information about escrow services. It does not constitute legal, tax, or investment advice. Escrow transactions involve complex legal and financial consequences that vary by transaction type and individual circumstances. Parties should consult with qualified attorneys and tax professionals regarding their particular transactions. California regulations and market conditions change periodically. Last reviewed: July 2026.
