Vancouver Real Estate Buyers Safety: Hold Backs in the Contract of Purchase and Sale
Hold Backs in Vancouver Real Estate
Far too often Sellers in Vancouver agree to do things that they don’t end up doing. In a Vancouver Real Estate transaction this could result in a Buyer being responsible for thousands of dollars in repairs or future payments if a Seller does not do what they agree to do.
A Hold Back is a very good way to ensure that what a Seller agrees to in an Accepted Offer actually gets done.
What is a Hold Back?
A hold back is when the Buyers Lawyer keeps some (or “holds back”) of the money the Buyer is paying the Seller for a specific purpose for a set period of time AFTER the Buyer has bought the property. At the end of the period of time for the Hold Back, the money can be released by the Buyers Lawyer to the Seller if the money is not used for the specified purpose.
Why use a Hold Back?
Often in a Contract of Purchase and Sale, the Seller is responsible for repairs to a property before the Completion Date or payments to a third party after the Completion Date as part of the deal.
A hold back ensures there is sufficient money for any future payments the Seller fails to pay as well as if the Seller doesn’t do the required repairs before the Completion Date. A Buyer does not have to rely on the Sellers word, but can have tangible evidence that money is held by the Buyers Lawyer set aside for the agreed work or payments.
Hold backs can be very good to use with Sellers who are overseas or are difficult find as well as those who have not been acting in good faith. Suing a Seller is VERY expensive and time consuming. It is far easier and simpler to have money set aside when the Contract of Purchase and Sale is negotiated to absolutely ensure the that what the Seller agrees to actually occurs.
Hold Backs are often used in new construction. I’ll discuss this in a future series of posts on how to buy a new property in Vancouver.
Buying Your First Home? Check out my series of videos for First Time Home Buyers!