what is an escrow holdback

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Icon Mini Profile ferrarab

Joined: 26 Oct 2010

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Post Posted: Tue Oct 26, 2010 1:46 pm    Post subject: what is an escrow holdback

Buyer wants to buy a home with FHA loan. Home has work to be done that probably will not be allowed by FHA. Can he do an escrow holdback? And if so who provides the money to be held for work to be done?
Icon Mini Profile jameshogg

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Post Posted: Tue Oct 26, 2010 7:49 pm    Post subject:

Hi ferrarab,

As far as I know, an "escrow holdback" is an technique used in merger and acquisition transactions where a portion of the merger is placed into an escrow account. The buyer then can look to the escrow holdback for coverage of its indemnification claims. However, I doubt whether your friend will be allowed to go for an escrow holdback in case of a home purchase.

Icon Mini Profile willamsiddle

Joined: 26 Oct 2010

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Post Posted: Tue Oct 26, 2010 9:39 pm    Post subject:

Hi ferrarab

According to me, the portion of the loan that is held back until some additional requirements such as completion of or an improvement project is attained. The Escrow hold backs are a borrower accommodation that may allow the loan to close and the borrower to occupy the property while incidental work is in progress.

[External link deleted as per forum rules. Thanks.]


Post Posted: Sat Dec 04, 2010 7:41 pm    Post subject: in the same boat


I am in the same boat. I am in contract for a place which has 3k worth of section-1 repairs. I am going for FHA. Lander asks for section1 repairs before closing the loan. And Sellers are not allowing that. Is it possible that lander does "escrow holdback" and close the deal first? Then escrow can be used to fix section1?
Icon Mini Profile adonis

Joined: 22 Oct 2005

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Post Posted: Sun Dec 05, 2010 10:48 pm    Post subject:

Welcome hari,

It will be the lender's discretion whether or not the lender will go for an escrow hold back and close the deal. You should contact your lender and take his opinion in this regard.

Procrastination is the enemy of your financial success


Post Posted: Sun Dec 05, 2010 11:15 pm    Post subject:

thanks Adonis for responding. Appreciate it.

So, we are buying "as is" and we did not order any inspection. Appraiser has some things in his report which he is asking to be repaired. So, even if its a small set of minor section 1 repairs, can a lander be adamant and refuse to fund before fixing it? Asking before the seller is not at all ready to let us (buyers) do any repair before deal closes.
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