Owner's choice of escrow?

April 26, 2021

by a searcher from Columbia University - Columbia Business School in Washington, DC, USA

I've encountered a seller who wants the choice on where the escrow funds are deposited, and specifically wants funds placed in more than a standard interest bearing account...he suggested a simple Vanguard fund. Has anyone successfully used a mutual fund or something similar for escrow funds?

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Reply by a searcher
from Arizona State University in Boston, MA, USA

Dan, I like ^redacted‌ have used the Seller Note as collateral in lieu of escrow account. I have and am using both, meaning if reps and warranties exceed the escrow amount, then the seller note is tapped into. In regards to your specific scenario, I don't see a problem with it, other than there would be fees associated with that investment and potential liquidity speed. The worse case scenario is that that there is major market correction and the value of the mutual fund plummets and you need to tap into the escrow as well. While the probability is very small, it is still a risk you would need to calculate.

Reply by a searcher
from Columbia University in Washington, DC, USA

Thanks ^redacted‌ ^redacted‌. ^redacted‌ as the buyer, I want an escrow in place. I like the suggestion to just use a note and potentially make claims against it instead. I worry that in today's frothy stock market, the amount could just as easily lose as gain 15% of its value over the course of a year.

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