Escrow

An escrow is a trust account on which part of the purchase price is retained by a neutral trustee (escrow agent) for a defined period after closing. It serves as security for potential buyer claims, for example arising from a breach of representations and warranties or from a subsequent purchase price adjustment.

The escrow amount is often between five and fifteen percent of the purchase price, and the term is usually aligned with the limitation periods of the warranties (typically 12 to 24 months). If no valid claims are asserted during this period, the remaining amount is released to the seller.

The escrow provides security for the buyer but ties up the seller's capital. As an alternative or supplement, W&I insurance is increasingly used. In our closing support, we structure escrow arrangements so that the interests of both sides are secured in a balanced way.