It takes money to make money. But with all the scams around, especially surrounding 100% financing and upfront, or Due Diligence fees, a U.S. Escrow Account is an established procedure that can provide protection for both sides in the transaction.
How Escrow Protects
Borrowers: In the case of a Borrower seeking 100% financing, Due Diligence fees are usually required before funding, so the Lender can ensure the project is viable before providing financing. Escrow ensures the Borrower’s wishes are upheld and certain actions are completed (for example, the issuance of an LOI), before the Due Diligence fees are released.
Lenders: Escrow protects the Lender as well, from investing valuable employee time (which translates into money), as they pre-qualify a project for funding, only to find the Borrower doesn’t have the fees for the Due Diligence. If the fees are already in Escrow, the Lenders know that, assuming the project is viable, the loan will move forward, the project will get funded, and they will earn their profits.
How to Protect Yourself from these Mistakes
But, don’t make the mistake of assuming every Escrow arrangement is equal. If the Escrow Agent is not licensed by the government (i.e. not a United States Licensed Attorney), they might only be held to a “gross negligance” standard if they don’t protect the Escrow funds. Their Escrow forms, signed by everyone involved, will most likely contain Indemnity clauses, leaving you unable to prosecute them.
Escrow Agents licensed by the State, such as licensed U.S. Attorneys, are held to a higher standard by the government. A licensed Escrow Agent could lose his license, his job, and his freedom, if all Escrow laws and instructions aren’t followed to the letter.
Which means using Escrow and a licensed Escrow Agent ultimately provides better protection for both Borrower and Lender.
About Us: WorldwideCommercialFunding.com assists clients in obtaining 100% financing for US and International commercial real estate and business ventures that require $2 million USD or more in funding. In addition to providing a 100% refund guarantee (“If your project is viable and factually presented, you get your funding or you get your money back”), Due Diligence fees are placed into by Escrow whose Escrow Agent is a licensed New York State Attorney.