BoatWiki - Definitions
A reserve can be defined in boating terms as the amount held back from the sellers proceeds at the finalization of a purchase and sale arrangement. This is also known as a closing reserve, holdback reserve, or settlement reserve. It is designed to cover any deficiency issues that remain unresolved pending further clarification or investigations.
A reserve allows the finalization of a boat purchase and sale transaction even though certain issues remain unresolved. This is typically held for a defined period of time by a closing agent for further distribution or refund as warranted.
Reserves are sometimes necessary to ensure a seller's performance in the event of potential title deficiencies or any unresolved liens. Any unused amounts are ultimately distributed to the seller as part of the settlement.
The need for any settlement hold-backs or reserves will often hinge on the buyer's confidence that a seller will make good on any representations or warranties. This is where a thorough background check on the seller may tip the scale one way or the other.
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5/16/2022 - Page initiated by Team BoatWiki.