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Escrow Hold Back

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Escrow Hold Back

Dear Phyllis,

I look forward to your real estate advice. We sold our home earlier this year during the extremely cold weather. The buyer’s inspector noted that because the weather was so cold the air conditioning couldn’t be properly tested. The inspector and the other agent wanted us to leave five thousand dollars of our funds in escrow after closing. As soon as the weather warmed, the buyer’s agent said they could properly test the air conditioner. And then release the escrow hold back assuming it passed the later inspection.

Our Realtor said “no”. She reasoned that after escrow closed, there would be no way to negotiate. If the buyer’s inspector found a $4,000 necessary repair, it really wouldn’t be negotiable. The buyer cancelled but we sold to a back-up buyer at the same price. My Realtor and I thought this such an odd request. My question: Have you ever heard of this situation before?


Dear Debbie,

I have never heard of holding a portion of the seller’s proceeds in escrow in the event something “may” not be properly working. The components of every home have a life expectancy. You don’t mention if the buyer had negotiated a home protection policy. If they did, and it was later discovered that there was a problem with the air conditioner, the repair might be covered by this policy.

Another thought that comes to mind: After the buyer moves in and if the air conditioner is not properly working is it because of when you owned the home? Or could it be an issue with the buyer’s maintenance?

Most inspection negotiations involve give and take. Your air conditioning unit might be working just fine, but an inspector may suggest bringing it up to current code. Perhaps the cost could be two thousand dollars. In this instance, escrow is holding your five thousand dollars. The air conditioning is working but could use an upgrade. How would you and the new owner negotiate this?

I agree with your Realtor’s reasoning and am glad that you were able to resell at the same price.

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One thought on “Escrow Hold Back

  1. Nancy says:

    I have know a few people that have needed to use the home buyers one year protection plan. Most of them were very unhappy with the quality of work. So it’s great to have those policies but they are for sure not a panacea

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