Definition
Sometimes, after closing, part of the sale proceeds are held in escrow to cover things like seller repairs not yet completed or disputed prorations. Once conditions are satisfied, the money is released.
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An escrow holdback (or holdback) is a portion of the sale proceeds that doesn't change hands at closing but is retained by the escrow officer or title company. Common reasons for holdbacks include: ensuring the seller completes agreed-upon repairs, covering disputed prorations, or holding funds for unknown liens. The escrow officer releases the held funds once the condition is satisfied or both parties agree to its distribution.
Pro Tip
Clearly define what triggers escrow holdback release in writing and request regular updates from the escrow officer.
Example
The property had two minor repairs agreed to in the purchase agreement. The buyer and seller agreed to hold $8,000 in escrow for 60 days to ensure the repairs were completed satisfactorily before the seller received the final funds.