Escrow holdbacks are a great way to save deals from falling through. Here’s what I mean.

What is an escrow holdback?

When you buy a property, the bank providing your financing will send an appraiser to the home to appraise it. In addition to calculating the home’s value, they’ll check the home’s condition. Banks don’t like to see specific problems in homes that are under contract (broken windows, a bad roof, etc.), so if they see these problems, they’ll require them to be fixed before they finance the deal. 

If the seller doesn’t have the money to make these repairs before closing or the buyer can’t make them either, that’s where an escrow holdback comes into play. 

“An escrow holdback is a great way to save a deal from falling through.”

For example, let’s say the roof needs repairing. In this case, we’d get a bid from a licensed contractor and show the bid to the mortgage company. After they approve it, they’ll instruct the title company to hold in escrow a cash amount that’s 1.5x the bid amount. If the bid is $1,000, for instance, the escrow holdback amount would be $1,500. 

After the deal closes, they’ll give the buyer anywhere from two weeks to 30 days to fix the problem. Once it’s fixed, the mortgage company instructs the title company to release the escrow holdback amount to the buyer. 

The bottom line is, an escrow holdback is a great way to save a deal from falling through. 

If you have any questions about this or any other real estate topic, don’t hesitate to reach out to me. I’d love to help you.