An Escrow Holdback Agreement Addendum is common in real estate transactions to set guidelines for money held back in escrow until the seller fulfills all of their duties after closing.
It outlines the seller’s obligations to collect the funds in escrow.
What Is an Escrow Holdback Agreement Addendum?
An escrow holdback agreement addendum is a legal contract that “holds back” additional money or a portion of the purchase price at closing.
The funds are held in escrow until the seller completes specific tasks or improvements related to the property. The money is released once the seller completes each of the escrow holdback agreement addendum requirements.
Often, a third-party escrow agent holds the funds subject to the escrow holdback agreement addendum. This third party might be a lender, escrow agent, or title company that holds the funds in escrow.
When Do You Need an Escrow Holdback Agreement Addendum?
There are several situations where you may need an escrow holdback agreement addendum. These are especially common in real estate purchases when conditions must occur before the sale is finalized.
Situations for using an escrow holdback agreement addendum commonly include:
- When the seller must repair, finish, or complete tasks related to the real property
- Regulatory or governmental approval is holding up the sale of the property
- Issues with the deed or title must be resolved
- A delay occurs with the financing, mortgage, or another critical part of the real estate transaction
- Any other agreements between the parties that must be completed before the sale can finalize
Any of these situations could lead to you needing an escrow holdback agreement addendum.
How To Write an Escrow Holdback Agreement Addendum
Writing your escrow holdback agreement addendum is easy when you follow each of these steps:
Step 1 – Customize and Download Your Template
The escrow holdback agreement addendum template on this page makes it easy to customize with your details and requirements. The template is available in both Microsoft Word and PDF formats.
Once completed, you can download the form for your use. You can then attach it to a real estate purchase agreement or other real estate transaction document.
Step 2 – Identify All Parties To the Escrow Holdback Agreement Addendum
Your document should identify all parties relevant to your escrow holdback agreement addendum.
This includes the buyer, seller, and any third-party escrow agent that might be part of the agreement.
Contact information should include the following:
- Each party’s full name and title, if applicable
- A company’s full name, if any party is a business
- Each party’s address
- Phone number and email information for each party
Step 3 – Detail the Conditions for the Release of Escrow Funds
An escrow holdback agreement addendum sets the conditions the seller must meet before the escrowed funds may be released. It must clearly outline these obligations and what will occur when those conditions are met.
The document should describe what the seller must do to fulfill the agreement and any relevant dates by which those actions must be completed.
Add any information as to the steps required of the seller as part of the escrow holdback agreement addendum.
Step 4 – Include the Amount of Money Held in Escrow
Under an escrow holdback agreement addendum, a certain amount of money is held back in escrow until the seller completes each obligation.
Your document should clearly state how much money is held in escrow until those conditions are met.
Your template will include legal language to cover what may happen with the funds if the conditions are met.
Step 5 – Define the Fees and Responsibilities of the Escrow Agent
Your escrow holdback agreement addendum should outline critical details about the escrow agent and their role in this real estate transaction.
It should include legal clauses that define the following:
- What fees the escrow agent is owed (for example, a flat fee, percentage, etc.)
- All duties and obligations of the escrow agent
- Identifying information for the escrow agent
- Any other information that governs the escrow agent’s conduct in the transaction
Step 6 – Add Dated Signature Information
Your escrow holdback agreement addendum should conclude with a signature block for the buyer, seller, and escrow agent. Each party should have a separate line for their:
- Full printed name
- Signature
- Date the signature occurred
Failure to properly sign this document may render it invalid. Ensure this section is completed correctly and printed names are fully legible if handwritten.
Escrow Holdback Agreement Addendum Frequently Asked Questions
What are escrow holdback terms?
Escrow holdback terms refer to the conditions that must be satisfied before the funds are released. These may include terms such as:
How long can money be held in escrow after closing?
This answer varies widely and depends on your situation. Typically, escrow is approximately 30 days. However, it can range from one week to several months. The details surrounding the parties and escrow holdback agreement addendum typically determine the length of escrow.
What is an example of a holdback clause in real estate?
A simple example of a holdback clause in real estate would read: “Seller and Buyer agree to hold back funds and place in Escrow at Closing, per the following terms and conditions, and to be released only upon satisfaction of each of the following conditions:.”
Escrow Holdback Agreement Addendum Sample
Below is an example of an escrow holdback agreement addendum.
