When it comes to buying or selling a property, there are a lot of agreements involved. One such agreement is a real estate retention agreement. While it may not be the most common document you come across, it is an important one that you should know about. In this article, we will explain what a real estate retention agreement is and what it entails.
What is a Real Estate Retention Agreement?
A real estate retention agreement is a legal document that outlines the terms and conditions under which a seller agrees to retain a portion of the sale proceeds from the buyer. This is often done in situations where there is a risk of the property losing value or there are potential liabilities associated with it.
In simpler terms, a retention agreement is a way for the seller to protect themselves financially in case something goes wrong after the sale has been completed. The buyer agrees to keep a portion of the sale proceeds in escrow for a specified period of time, usually anywhere from six months to a year. During this time, the seller may still have access to the money if something goes wrong.
Why Use a Retention Agreement?
A retention agreement is usually used in situations where there is a risk associated with the property being sold. For example, if the property has contamination issues or there are potential legal liabilities associated with it, the seller may want to protect themselves financially by using a retention agreement.
In some cases, a buyer may be hesitant to purchase a property with these kinds of risks. By using a retention agreement, the seller can help ease the buyer`s concerns and make the sale more attractive.
What Does a Retention Agreement Entail?
A retention agreement is a legally binding document that outlines the terms and conditions under which the seller agrees to retain a portion of the sale proceeds. The agreement will typically specify the amount of money that will be retained, the duration of the retention period, and any other relevant terms and conditions.
The retention period is usually long enough to cover any potential risks associated with the property. During this period, the seller may still have access to the retained funds if something goes wrong. For example, if contamination is found on the property, the seller may use the retained funds to pay for cleanup costs.
A real estate retention agreement is an important document that can help protect both the buyer and seller in a property sale. If you are buying or selling a property and there are potential risks involved, a retention agreement may be a good option for you. It is always best to consult with a real estate attorney to determine if a retention agreement is necessary and to ensure that the agreement is legally binding and protects your interests.