The escrow holdback agreement addendum creates a contract procuring a portion of the purchase price disbursement, usually the earnest money amount, be withheld from the seller until completion of the improvements stipulated in the purchase agreement. The document is intended to resolve issues with promised provisions yet to be rectified, while still allowing for the closing to proceed. The money held until the listed repairs are completed provides security that the seller will follow through with their commitment preceding the sale. Typically a third-party escrow agency is commissioned to retain the funds until all obligations of the addendum have been met.
Earned Interest on Pre-Closing Escrows (26 CFR § 1.468B-7) – Any interest derived from the financial consideration while deposited in the escrow or trust account is to be retained by the buyer. The amount can be employed as payment to cover purchase costs.