What is an escrow?
By Adam Friend | Senior Vice President of Business Development
Escrow is an arrangement between Veritext and the seller where a portion of the closing proceeds are held for a period of time (no longer than 24 months unless tied to a specific issue). The funds are held to ensure that in the event of an indemnification claim (such as taxes owed by the seller, pre-closing expenses that had not been paid), Veritext can use those funds to satisfy liabilities retained by the seller or claims we may have against the seller in accordance with the purchase agreement.
The escrow can be structured as a holdback where Veritext holds the funds until an agreed-upon timing of release or by a third-party bank. The amount of the escrow varies by transaction, and in some instances, the escrow may be larger as a result of items specifically identified in due diligence. The escrow amount typically ranges from 10-15% of the closing proceeds.