Ask Phyllis!

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 $5,000 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.  Assuming it passed the later inspection, the money would be released.   

Our Realtor® said “no”.   Her reasoning was that after escrow was closed, there would be no way to negotiate.  If the buyer’s inspector believed there was a $4,000 repair, it really couldn’t be negotiated.  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?   Debbie

Dear Debbie,

I have never heard of holding a portion of the seller’s proceeds in escrow in the event something “may” not be working properly. 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 may be working just fine, but an inspector may suggest bringing it up to current code. Perhaps the cost might 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.

  Phyllis Harb