What is an escrow company?

Most aircraft sales or acquisitions involves large amounts of money, and the payment of an aircraft is usually made in two parts. The first payment is the deposit to secure the aircraft and start with the pre-buy inspection, the second payment is usually the remaining balance of the purchase price after the aircraft has been technically accepted. 

To transfer the deposit directly to a Seller you don’t know at all carries risks. Especially if the aircraft is not accepted after the pre-buy inspection and expenses have been incurred by the Seller. To make sure you don’t get caught in any discussions, and to make sure the deposit will be released, it is advisable to use an escrow company. 

There are also brokers who say, just wire the money to me, this also carries a risk and is certainly not advisable as they are also not impartial. Even though there are many honest brokers with a separate escrow account, there are also people who act unethically. And this happens more when there is a large amount of money involved. You certainly don’t want this during an aircraft sale or acquisition. An aircraft sale or acquisition must be tightly managed, and all matters must be handled fairly and correctly for all parties.

An Escrow company is a neutral third party that guides the transaction based on the Aircraft Purchase Agreement. Next to this they can also perform a title search, a lien release or prepare a bill of sale when needed. Most important is that they protect the mutual interests of the Seller and Buyer. 

After the set-up of an Aircraft Purchase Agreement, that is signed by the Seller and Buyer, an escrow account will be set-up. Once the set-up is complete, the Buyer will wire the deposit to the designated account of the escrow company. From then every party (Buyer, Seller, brokers, bank etc.) can stay in direct contact with the escrow, they are basically the central point of contact and will gather all the documents as agreed in the Aircraft Purchase Agreement.

Once the aircraft has been technically accepted after the pre-buy, the remaining amount will be placed in escrow. The escrow will mention to all parties that the full amount has been received. They will then start with the closing process according to the steps in the Aircraft Purchase Agreement. On the selected day of the closing, the escrow will close only when they have confirmation of the Seller and Buyer to close. They will contact the receiving parties by phone to verify their bank account number before any payments will be made.

In short, an escrow company costs some money, but this pays off twice. You can be sure that the interests of both parties are handled correctly, and this is extremely important during the transaction of the aircraft!

Do you need help buying an aircraft? Please contact us at sales@faaircraftsales.com, you can also call us at +31(0)15 820 0999.