Holdback

Holdback: A holdback in real estate refers to a portion of the purchase price or construction loan proceeds that are not immediately released to the seller or borrower at closing. Instead, this amount is held back by the buyer or lender to ensure certain conditions are met or specific work is completed.

For example, in a real estate transaction, a buyer might hold back a portion of the purchase price until the seller completes agreed-upon repairs or improvements. Once the work is completed and verified, the held-back funds are released to the seller.

In a construction loan, the lender might hold back a portion of the loan proceeds until certain stages of the construction are completed. This serves to mitigate the risk of the lender by ensuring that the funds are being used appropriately and that construction is progressing as planned. These held-back funds, often referred to as "holdback funds" or a "holdback reserve," are typically released in phases as work is completed and inspected.

The specific terms and conditions regarding holdbacks are typically outlined in the purchase agreement or loan agreement.