The Cash Holdback Escrow Solution

The parties involved in the purchase, sale and refinance of real estate are often confronted with obstacles that can hold up the closing of the real property transaction.  One solution is to have the parties agree to have cash held back at the transaction closing in a Cash Holding Escrow or Cash Holdback Escrow pending the resolution of the problem.  Cash or closing proceeds can be set aside and held by an independent third party or escrow agent until the pending items are completed or conditions have been met or resolved.

The Cash Holding Escrow or Cash Holdback Escrow is a very simple escrow solution to an often complicated problem.  These problems often arise at the last minute and can delay, complicate or even result in the cancellation of some already fragile real estate transactions. 

Putting a Cash Holdback Escrow or Cash Holding Escrow in place at the last minute can save these transactions.  But, many independent escrow companies, title insurance companies, trust companies, banks and other financial institutions will often decline to administer these Cash Holding Escrows or Cash Holdback Escrow account transactions because they do not have adequate systems to track the various requirements for the Cash Holdback.

Comments

[robert may - realtor]

I have never heard of such a thing. I hope you don't mind but I am going to run the idea past some of my real estate friends over at lethbridgerealestateblog.com and get a bit more feedback on it.

[jay great falls real estate]

The question I have is whether having a 3rd party escrow such as Exeter Fiduciary Services, LLC -- of which I've heard good testimonials-- does that give you any flexibility with the 1031 timelines???

J

[Staff]

Hi Jay, no, the cash holdback escrow account will only help parties set aside funds pending the resolution of their differences. It will not affect any 1031 exchange deadlines.

[Edwin Brown Subject To Investor]

Have you had trouble with lenders balking at these "cash holdback accounts". I know with many conventional single family properties, this could actually kill the loan.

[Staff]

Edwin, I don't think you understand the purpose of the cash holdback escrows. The holdback generally does not affect the lender, and/or is often requested or required by the lender. It is often used when a dispute arises or there are risidual issues that must be completed or resolved post closing.

These cash holdback escrows are generally not for residential, single family properites. They are for larger transactions such as commercial properties or dispute, resolution, settlement accounts.

[James Morgan - Puritan Financial Advisor]

Putting a Cash Holdback Escrow or Cash Holding Escrow in place at the last minute can save these transactions.