What is a Holdback?

The last visit to a property before a buyer closes is a walk-through. Most of the time, the property is empty and ready for sale. When there are problems, the solution is a holdback.

A holdback is created at closing. It is a legal agreement between the buyer and the seller. The seller will get less money from the sale for the period of time it takes to remedy the problem. Holdback of, let’s say, $1000 is held by the closing attorney until the seller finishes moving out, returns something they took that belongs to the house, or repairs damage that happened during the move.

Prevention: Many of the disputes that could happen at walk-through are prevented because your agent has already checked that things that should stay are clearly understood by the seller. On closing day, the problems are either things left behind that are garbage, or there is damage during the move-out.

Intention: Some of the time, the seller does a poor job of emptying the house, and they don’t care. Sometimes, the seller runs out of time and they didn’t finish the move-out. Sometimes they accidentally drive off with the garage door opener.

However, if the sellers or tenants leave objects in the house or yard, take things that belong to the house or yard, or damage the house on the way out, you have recourse in the form of a holdback.

What happens most of the time with a holdback?

If the seller did not have the house or condo ready for you at closing, most of the time, they do what they needed to do that day, or the next. Then they get their holdback money back. It is unusual for the seller not to make this right; holding some money back helps give them some incentive to do it efficiently.

Sometimes, in the case of damage, the seller will give the buyers some or all of the holdback money so that the buyers can repair the damage their way. Then the seller recoups their loss through the moving company or their homeowner’s insurance.

OOOPSY!

At a recent closing, some well-intentioned sellers grossly underestimated the time it would take to get all their stuff out of the basement. This happens. There was a holdback. The sellers finished their move and cleared the trash off the yard. The sellers got their money back.