Aircraft Escrow and Closing Process: Complete Transaction Guide

Professional aircraft escrow services protect both buyers and sellers during transactions. Understanding the airplane closing process ensures smooth, secure ownership transfer with proper documentation.

What is Aircraft Escrow

Escrow Definition:

• Neutral third party holds funds and documents
• Ensures all conditions met before closing
• Protects both buyer and seller interests
• Coordinates lien payoffs and title transfer
• Manages contingencies and inspections

Why Use Escrow:

• Buyer protection: Funds safe until clear title
• Seller protection: Assurance of payment
• Third-party coordination of complex transactions
• Professional handling of FAA paperwork
• Legal protection for both parties

Escrow Process Timeline

Week 1: Opening Escrow

• Buyer and seller sign purchase agreement
• Escrow account opened with agent
• Buyer deposits earnest money ($5,000-$25,000)
• Title search initiated
• Pre-buy inspection scheduled

Week 2-3: Due Diligence

• Pre-buy inspection completed
• Title search results received
• Lien payoff amounts obtained
• Repairs negotiated if needed
• Financing finalized

Week 4: Closing Preparation

• All contingencies satisfied
• Final walk-through inspection
• Closing documents prepared
• Funds wired to escrow
• Final lien payoff coordination

Closing Day:

• Documents signed by both parties
• Escrow releases funds to seller/lien holders
• Bill of sale executed
• Keys and aircraft transferred
• FAA registration paperwork submitted

Escrow Costs and Fees

Typical Escrow Fees:

• Under $100,000: $500-$800
• $100,000-$250,000: $800-$1,200
• $250,000-$500,000: $1,200-$1,800
• Over $500,000: $1,800-$3,000+
• Usually split 50/50 buyer and seller

Additional Costs:

• Title search: $200-$400
• Wire transfer fees: $25-$50 each
• Overnight shipping: $30-$60
• Notary services: $50-$150
• Document preparation: Included typically

Documents Required for Closing

From Seller:

• FAA Bill of Sale (AC Form 8050-2)
• Current aircraft registration
• Airworthiness certificate
• All aircraft logbooks
• Weight and balance data
• Lien release letters (if applicable)
• Maintenance records
• Equipment list and STCs

From Buyer:

• Purchase funds (wire transfer)
• FAA Registration Application (AC Form 8050-1)
• Proof of citizenship or entity status
• Insurance binder showing coverage
• Signed purchase agreement

Lien Payoff Coordination

Escrow Agent Responsibilities:

• Contact lien holder for payoff amount
• Verify per diem interest calculations
• Wire funds directly to lien holder
• Obtain lien release letter
• Submit release to FAA for recording
• Ensure clear title before fund release

Multiple Lien Scenarios:

• First lien holder paid in full first
• Second lien holder receives remaining funds
• All releases obtained before closing
• Seller provides any shortage

Contingencies in Escrow

Common Contingencies:

• Pre-buy inspection: Satisfactory results required
• Financing approval: Buyer must secure loan
• Clear title: No liens or claims
• Test flight: Buyer acceptance of performance
• Repairs completed: If negotiated post-inspection

Contingency Removal:

• Written notice required to remove
• Timelines specified in purchase agreement
• Failure to remove allows buyer withdrawal
• Earnest money returned if contingency not met

Post-Closing Tasks

Immediate (Day 1-7):

• File FAA registration paperwork
• Obtain temporary registration (pink slip)
• Activate aircraft insurance policy
• Transfer aircraft to new location if needed
• Update databases (ForeFlight, etc.)

Within 30 Days:

• Receive permanent FAA registration
• Update state registration if required
• Pay sales tax if applicable
• Schedule first owner annual inspection

Choosing Escrow Company

Recommended Escrow Services:

• Aero Space Reports
• Aerospace Reports Inc.
• Guardian AeroSpace
• Aviation title companies with escrow services
• Specialized aviation attorneys

What to Look For:

• Experience with aircraft transactions
• Proper licensing and insurance
• Clear fee structure
• Positive reviews and references
• Responsive communication

Frequently Asked Questions

What does aircraft escrow cost?

Escrow fees $500-$3,000+ depending on aircraft value. Typically $800-$1,200 for $100K-$250K aircraft. Usually split 50/50 between buyer and seller. Additional costs: title search $200-$400, wire fees $25-$50, notary $50-$150. Total closing costs 1-2% of purchase price.

How long does aircraft escrow take?

Typical timeline 3-6 weeks from purchase agreement to closing. Week 1: Open escrow, start title search. Weeks 2-3: Pre-buy inspection, due diligence. Week 4+: Satisfy contingencies, prepare closing. Rushed closings possible in 2 weeks if all parties ready.

Is aircraft escrow required?

Not legally required but highly recommended for transactions over $50,000. Lenders typically require escrow for financed purchases. Protects both parties, ensures clear title, coordinates lien payoffs. Cost minimal ($500-$1,500) compared to transaction protection provided.

What happens to deposit if deal falls through?

Depends on reason. Buyer withdraws within contingency period: Deposit returned. Buyer backs out without valid contingency: Seller keeps deposit. Seller fails to provide clear title: Buyer gets deposit back. Escrow agent holds funds until both parties agree on distribution or court orders.

Can I close aircraft purchase without escrow?

Yes, but risky. Direct closing requires: Buyer trusts seller has clear title, simultaneous exchange of funds/documents, buyer handles all lien payoffs, no third-party protection. Works for simple cash deals between known parties. Any complexity warrants escrow protection.