An escrow holds part of the purchase price with a third party to secure the seller’s post-closing obligations. A holdback achieves the same with the buyer retaining the funds, which is cheaper and weaker from the seller’s perspective.
Amount and duration. Sized against the indemnity cap and the survival period, with a release schedule that may step down at intervals.
Release mechanics. Automatic release on the anniversary of all amounts not subject to a pending claim, with pending claims described in a notice meeting stated requirements. Vague claim notices designed to hold the escrow open are a recurring problem, and the agreement should require a good faith estimate and a description of the basis.
The escrow agreement is a separate contract with the agent, whose duties are ministerial and who will not adjudicate anything. It should provide for joint instructions, a final non-appealable order, and interpleader if the parties deadlock.
Exclusive remedy. Whether the escrow is the buyer’s sole recourse, or merely the first, is the central commercial term. Sellers want exclusivity subject to fraud; buyers want recourse beyond it for fundamental representations.
Tax and interest. Who is treated as the owner of the escrowed funds and who reports the income should be stated, because the default answers are not intuitive.