A boat buyer in heat has little patience. My clients often tell me they were “ready to close yesterday.” However, surveys and inspections often reveal minor deficiencies, which the parties may agree to have repaired as a condition to closing. Sometimes, these repairs cannot be completed until well past the intended closing date. In certain circumstances, an escrow holdback arrangement is a tool that can be used to keep the closing date from being extended.
What Is an Escrow Holdback?
An escrow holdback typically occurs when a portion of the purchase price is held back pending completion of repairs. These arrangements are typically seen in cash transactions where the necessary repairs are a relatively minor amount compared to the overall purchase price, and a holdback is oftentimes put in place as part of the conditional acceptance. For example, the acceptance of the boat is conditioned upon holding back a portion of the agreed upon purchase price to secure the seller’s obligation to repair certain items by a specific date or time.
Important Insight
There are many different forms of escrow holdback arrangements, but a few things should always be considered. To begin with, the funds should be held by an independent third party. If possible, the parties should use an agreed upon attorney as the escrow agent, where the funds will…
