What Exactly is a holdback?
A real estate holdback is an arrangement in which a portion of the funds involved in a real estate transaction is held by a neutral third party until certain conditions are met. This is often used in situations where a property inspection or final walkthrough has revealed issues that need to be remedied before the sale can be completed.
The buyer and seller may agree to hold back a certain amount of the funds until the issues are resolved, and the funds are held in an account specifically designed for this purpose. Foolproof Closings will act as a neutral third party to manage the account and check that all remediation requirements have been met.
Once the issues are resolved and all conditions of the holdback agreement have been met, Foolproof Closings will release the funds from the account and distribute them to the appropriate parties.
Foolproof Closings provides assurance to all parties post closing that the necessary conditions have been fulfilled.
How The Process Works
1
1
1
Both parties open an account with Foolproof Closings at the start of the real estate transaction.
2
1
1
If any issues come up that require remediation before closing, the buyer and seller will agree on an amount to be held back until the issues are fixed.
3
1
3
The parties involved, including the real estate agent and attorneys, will determine how much will be held back.
4
4
4
The parties involved sign the “Completion agreement" that outlines the terms and conditions of the holdback, such as the amount of the holdback, how the funds will be released, and the timeline for remediation.
5
4
4
The funds are deposited into the account and managed by Foolproof Closings.
6
4
6
Once the fixes are completed, and all conditions of the Completion Agreement have been met, Foolproof Closings releases the funds to the appropriate parties.
When A Holdback is Useful
While most commonly used when problems are discovered at the final walkthrough, a holdback can be used whenever there are outstanding issues that must be completed after the closing has occurred.
Because the holdback amount is taken from the sale proceeds, and held by Foolproof Closings, the neutral third party, the holdback is a form of protection for the buyer and seller.
The seller knows they will receive the rest of the proceeds once the remediation is complete, and the buyer knows the seller has the incentive to complete all the requirements.
Thank you for your interest in Foolproof Closings. We are currently in pre-launch, but we invite you to join our beta launch.
By joining our beta program, you will have the opportunity to be among the first to experience the benefits of our holdback management solution.
As a beta user, you will receive exclusive access to our platform and help us refine our services. Thank you for your support and we look forward to serving you soon.
This website uses cookies.
We use cookies to analyze website traffic and optimize your website experience. By accepting our use of cookies, your data will be aggregated with all other user data.