Nothing is worse than approaching your closing date and having issues arise.
This blog will focus on situations when Gustan Cho Associates have used escrow hold backs.
What are escrow hold backs?
When we think of the term “escrow”, we think of an escrow account for our taxes and insurance payments.
The funds will be put aside to assure the work gets done, a form of an insurance policy for the buyer and lender. Funds are held by a third party like the title company. The title company officer releases the funds from the escrow account once the work has been completed and the lender approves the release.
Many times, in real estate transactions the completion of a septic system still needs to be completed.
NOW CLOSING IS COMPLETED, and more importantly, both parties are happy.
The most common use of an escrow hold back seems to be when buying a NEW CONSTRUCTION HOME.
The most recent was the yard not being completed. Since it is the winter, they cannot level and sod the yard. So technically, the house is not complete.
Landscaping is one of the most common uses of a hold back.
Each loan program does have specific guidelines on escrow hold backs. Example; for a new construction property is the cost of improvement cannot exceed 2% of the appraised value. At that point there is just too much risk and will need to be completed before closing. So, if the home is $300,000, any escrow hold back needs to be for $6,000 or less.
The Gustan Cho Team at Loan Cabin Inc. is one of the very few direct lenders with no overlays that offer escrow hold backs for repairs. Our team of licensed and support personnel is available 7 days a week, evenings, weekends, and holidays.