What is a hold-back of funds?
One question we often receive here at Neighborhood Escrow is, “What is a hold-back of funds?” As always, we’re happy to answer any and all questions you have throughout the escrow process. Read on to find out more about what a hold-back of funds is so that it can be prepared if it happens during your escrow transaction.
Defining escrow
But first, let’s go over what, exactly, escrow is. At the most basic level, escrow is when an impartial party (Neighborhood Escrow) holds onto all items of value during a real estate transaction until all stipulations made by all parties involved (borrower, seller, and lender) have been fulfilled.
What’s a hold-back of funds?
A hold-back of funds occurs when the property has been sold, the ownership has been transferred, but funds are still held in escrow. This sometimes happens new owners let the seller’s family state in the hours for an extra week or two until their new home is ready for move-in. In that case, a “rent-back” agreement would be signed that requires the seller to pay a set rate for their length of stay. If a rent-back agreement is in place, the new owner should request that their escrow agent hold back a portion of the seller’s proceeds until they’ve completely vacated the property and left it in the condition specified in your contract.
Another time a hold-back of funds occurs is when the buyer finds something wrong with the property during their final walkthrough of the property. Maybe the seller agreed to make the repair, but it couldn’t be finished before closing day. A hold-back of funds can be used so money will be held back by your escrow company, Neighborhood Escrow, to cover the cost.
Here’s one final illustrative example. A buyer purchases a newly constructed home, but requests a hold-back of funds until all work on the property is complete and the buyer signs off on it.
Once escrow is completely closed and the hold-back of funds has finished, all parties will receive a final closing statement and other important documents in the mail. We recommend that you check this statement carefully and if you find any mistakes, don’t hesitate to call us to get it resolved ASAP. Make sure you retain the closing statement and other documents about the purchase or sale of a home in a very safe, easily-accessible place because you’ll need it to file your next income tax return.
Contact us today
There are so many reasons to choose Neighborhood Escrow for all your escrow needs as a buyer, seller, or lender in a real estate transaction. You can count on our agents provide you with fast, reliable, personalized escrow services in Hermosa Beach, Redondo Beach, Manhattan Beach, The South Bay, Palos Verdes, and Torrance, CA. Contact us today! Call 310-378-2456 or email debbie@neighborhoodescrow.com to get started.
