Escrow Holdback Agreement Addendum

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An escrow holdback agreement addendum is money that is “held back” until the seller of property fulfills their duties after the closing occurs. The agreement outlines work or tasks that are needed to be completed in order for the seller to collect the last payment for the purchase of their property after the closing. In most cases, the title company or other escrow company acts as an intermediary and will only release the funds to the seller upon the completion of the seller’s duties in accordance with this addendum.

Escrow Agent – The title company, lender, agent, or other third (3rd) party should act as the middle-person. It is not recommended to elect the buyer or seller to act as the intermediary or holder of the escrow funds.

Interest Earned (26 § 1.468B-7(b)(1)(iv)) – Per the Internal Revenue Service (IRS) Code, any interest accrued while money is being held in an escrow account for the purchase of property shall be paid to the benefit of the buyer.

(Video) What is an Escrow Holdback Addendum?

How to Write

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1 – Download The Escrow Holdback Paperwork To Begin

The addendum on this page will give you the framework to define an escrow holdback that can and/or will apply to a purchase agreement. You will need to download it (using the buttons above) then fill it out using a program appropriate to the file type you select, then attach it to the agreement it pertains to.

2 – Identify Both The Purchase Agreement And The Concerned Parties

Article “I. The Parties” will serve as an introductory declaration of this addendum’s purpose. We will need to supply it with information unique to the agreement being discussed. To begin, refer to the targeted purchase agreement then copy its execution date to the first two blank lines. The first blank space is reserved for this date’s month and calendar day while the second blank space is reserved for the year. The next available space (following the term “…By And Between”) calls for the full name of the Seller named in the purchase agreement entered on it. Use the fourth space in this paragraph to present the Buyer’s legal name. The last party needed to complete this introduction is the Escrow Agent. Supply this entity’s full name on the last blank space.

3 – Detail The Seller’s Responsibilities

This addendum will need to disclose what the Seller must do to fulfill his or her obligations. This subject will be addressed in “II. Seller’s Obligations.” First, report the full dollar amount the Seller that shall be held in escrow written out on the blank preceding the word “Dollars.” Once you have written out the escrow amount, enter it numerically on the space with the dollar sign in the parentheses. Use the remaining blank lines in this paragraph to fully describe what the Seller must do to the Buyer’s approval for the purchase agreement to continue and the monies to be released from escrow. If more room is necessary to satisfy this area, you may add more room using an editing program.

4 – Define The Fees And Duties Of The Escrow Agent

The Escrow Agent will require compensation for his or her services. Locate the paragraph labeled “III. Escrow Fee” then, write out the full dollar amount the Escrow Agent expects to be paid on the blank space between the term “…Shall Be Paid” and the word “Dollars. Make sure to produce this number numerically to the space in the parentheses. The next area, “IV. Escrow Agent’s Duties,” shall discuss what is expected of the Escrow Agent in exchange for the amount listed in the previous article. Under the circumstances named in this passage, the Escrow Agent will be able to charge an additional predetermined amount (i.e. if there is a Buyer/Seller dispute). This amount must be documented using the two blank spaces provided. 

5 – A Dated Signature From The Buyer, Seller, And Escrow Agent Is Required For This Execution

The remainder of this document should be read in full by the Buyer, Seller, and Escrow Agent. Once these parties have agreed to the terms of this addendum, each one will be required to sign it. A few areas have been included at the end of this document so that each party can satisfy this requirement. Enough room has been supplied for two Buyers, two Sellers, and two Agents to sign their names. Keep in mind that every Buyer, Seller, and Escrow Agent involved with the purchase agreement must sign this addendum. Thus, if there are more than two Buyers, you must add an additional line so that all three may sign their names.

The Buyer must sign the blank line labeled “Buyer’s Signature” then, use the space attached to the label “Date” to report his or her signature date.  Every Seller who has signed the purchase agreement must sign a unique “Seller’s Signature” line then document his or her signature “Date.” The Escrow Agent involved must sign his or her name on the line “Agent’s Signature.” Once this is done, he or she must supply a signature “Date.”