Escrow Sizes on a $2.3mm deal

December 22, 2025

by a searcher from Princeton University in New York, New York, USA

I'm working on an LOI and considering putting a 35% 18 month escrow on purchase price to cover reps and warranties. I'm curious what's viewed as "market" here for escrow sizing on purchase prices? The deal is ~$2.3mm, I don't think R&W insurance will be effective here and am thinking the seller really shouldn't mind if there're no issues in the business

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Reply by a professional
from American University in Irvine, CA, USA

Hi, Nezim: If you do agree to put any money into a holdback escrow for your deal, you should consider other elements that we typically see in these situations, including lowering the percentage and the length of the holdback as has already been discussed (6 months after Closing is plenty of time for them to become aware of a breach). We sometimes also require a basket, meaning the buyer does not make a claim until the aggregate of all claims equals a specific dollar amount, so that you are not "nickled and dimed" in the process. Your willingness to retain any portion of the purchase price is a gesture of good faith on your part; it should be less burdensome on you, and not give the buyer carte blanche to take advantage of this willingness, but only use it if something meaningful comes up. Also, the fact that you may put some cash into a dedicated escrow should not mean or imply to your buyer that any claim it makes doesn't have to be clearly stated in writing to you, and that you should have a fair opportunity to assess the accuracy of such claim, with an ability to cure it or reject it, as the case may be. Let me know if you would like to discuss these points further.

Reply by a professional
from University of Michigan in Detroit, MI, USA

Hi ^redacted‌, as Piotr points out, indemnity escrows are the exception rather than the norm in the main street space. Is there a specific risk you're looking to mitigate or is this just a general risk mitigation structure? If the latter, the more common approach would be a forgivable seller note. And without good cause, it's unusual for the note to be more than 20% of the purchase price. Happy to discuss further. Feel free to reach out at redacted

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