Escrow Holdback Agreement - Texas

ESCROW HOLDBACK AGREEMENT (TEXAS)

THIS ESCROW HOLDBACK AGREEMENT (this "Agreement") is entered into as of [__/__/____] (the "Effective Date"), by and among the following parties:

ARTICLE 1. PARTIES

1.1 Buyer:

Name: [________________________________]
Address: [________________________________]
City, State, ZIP: [________________________________]
Email: [________________________________]
Phone: [________________________________]

1.2 Seller:

Name: [________________________________]
Address: [________________________________]
City, State, ZIP: [________________________________]
Email: [________________________________]
Phone: [________________________________]

1.3 Escrow Agent/Title Company:

Company: [________________________________]
Licensed Escrow Officer: [________________________________]
TDI Escrow Officer License No.: [________________________________]
Title Agent License No.: [________________________________]
Address: [________________________________]
City, State, ZIP: [________________________________]
Email: [________________________________]
Phone: [________________________________]
GF/Escrow No.: [________________________________]

ARTICLE 2. RECITALS

2.1 Buyer and Seller have entered into that certain Contract (☐ TREC-promulgated form / ☐ Custom contract) dated [__/__/____] (the "Contract") for the sale and purchase of real property located at:

Street Address: [________________________________]
City: [________________________________]
County: [________________________________]
State: Texas
ZIP Code: [____]
Legal Description: [________________________________]
Tax Account/Property ID: [________________________________]

(the "Property").

2.2 The Sales Price is $[________________________________].

2.3 The parties desire to hold back a portion of the closing proceeds to secure post-closing obligations.

2.4 In Texas, title companies and licensed escrow officers customarily handle real estate closings and escrow services.

ARTICLE 3. TEXAS ESCROW LAW COMPLIANCE

3.1 Escrow Officer Licensing. Under Texas Insurance Code § 2652, a person may not act as an escrow officer without being licensed by the Texas Department of Insurance (TDI) and being covered by a surety bond or deposit as required by Insurance Code Chapter 2652, Subchapter C.

3.2 TDI Basic Manual Compliance. The escrow and closing services provided under this Agreement comply with TDI's Basic Manual of Title Insurance, including Section VI (Escrow Procedures) and all applicable rate rules and forms.

3.3 Escrow Account Requirements. Escrow Agent shall:

(a) Maintain the Holdback Funds in a separate trust/escrow account at a federally insured financial institution in Texas;

(b) Ensure that all escrow funds are handled only by a licensed escrow officer as required by TDI;

(c) Maintain proper accounting records subject to TDI audit;

(d) Not commingle escrow funds with company operating funds;

(e) Conduct monthly reconciliation of escrow accounts.

3.4 Interest on Escrow Funds. Per Texas regulations, whenever interest is earned on escrow funds, there must be a specific written escrow agreement providing for the disposition of that interest. This Agreement constitutes such written agreement.

3.5 Independent Escrow Agents. If Escrow Agent is an independent escrow agent (not a title company), the agent must comply with all applicable Texas statutes and TDI regulations, including bonding requirements.

3.6 Broker Escrow (If Applicable). If a Texas-licensed real estate broker holds earnest money or other escrow funds, the broker must comply with TREC Rules (22 TAC Chapter 535) regarding trust accounts, including depositing funds by the close of business of the second working day after the date of execution of the contract by the principals.

ARTICLE 4. HOLDBACK DEPOSIT

4.1 Holdback Amount. At closing, the sum of $[________________________________] (the "Holdback Funds") shall be withheld from Seller's closing proceeds and deposited with Escrow Agent.

4.2 Source of Holdback Funds.

☐ Deducted from Seller's net proceeds at closing
☐ Deposited by Buyer as additional funds at closing
☐ Other: [________________________________]

4.3 Deposit Account. The Holdback Funds shall be deposited in:

☐ An interest-bearing escrow/trust account (interest allocation per Article 8)
☐ A non-interest-bearing escrow/trust account

at [________________________________] (financial institution), located in Texas.

4.4 Good Funds. All deposits at closing must be in the form of wire transfer, cashier's check, or other immediately available funds. Personal checks are not accepted for closing funds in Texas.

4.5 Timing. Escrow Agent shall deposit the Holdback Funds on the date of closing or the next banking day.

ARTICLE 5. PURPOSE OF HOLDBACK

5.1 Holdback Conditions. The Holdback Funds secure the following (check all that apply):

☐ Repairs and Remediation. Completion of repairs identified in:

• ☐ Inspection report/option period findings dated [__/__/____]
• ☐ TREC Amendment (repair amendment) dated [__/__/____]
• ☐ Contractor estimate from [________________________________]
• Description of required work: [________________________________]
• Estimated cost: $[________________________________]

☐ Lien Clearance. Satisfaction of liens or encumbrances on title commitment issued by [________________________________]:

• Lien holder: [________________________________]
• Type and amount: [________________________________]
• ☐ Mechanic's/materialman's lien under Texas Property Code Ch. 53

☐ Open Permit Closure. Obtaining final inspections and closing open building permits:

• Permit jurisdiction: [________________________________]
• Permit number(s): [________________________________]

☐ Code Violation Cure. Resolution of code enforcement violations:

• Issuing authority: [________________________________]
• Case number: [________________________________]

☐ Tax Proration Adjustment. Reproration of ad valorem property taxes pending final tax statement:

• Tax year: [________________________________]
• County/taxing jurisdiction: [________________________________]
• ☐ Applicable rollback taxes addressed (Property Tax Code § 23.55)

☐ Tenant Vacating. Vacating by occupant(s):

• Tenant name(s): [________________________________]
• Required vacate date: [__/__/____]
• ☐ Subject to Texas Property Code Ch. 92 (Residential Tenancies)

☐ HOA Assessment or Violation. Resolution of Property Owners Association matters:

• POA/HOA name: [________________________________]
• ☐ Resale certificate obtained per Property Code § 207
• Outstanding issue: [________________________________]

☐ Survey Issues. Resolution of survey discrepancies, encroachments, or boundary concerns identified on survey by [________________________________] dated [__/__/____]: [________________________________]

☐ Foundation/Structural Repair. Completion of foundation or structural repair work:

• Engineering report by [________________________________] dated [__/__/____]
• Contractor: [________________________________]
• Warranty: ☐ Transferable ☐ Non-transferable

☐ Septic System. Completion of septic system inspection/repair per TCEQ regulations:

• Licensed installer/inspector: [________________________________]
• ☐ OSSF permit required

☐ Well Water Testing. Completion of well water testing and any required treatment: [________________________________]

☐ Environmental Remediation. Including underground storage tanks, petroleum contamination, or other environmental issues: [________________________________]

☐ Other Conditions: [________________________________]

5.2 Holdback Allocation.

ARTICLE 6. RELEASE CONDITIONS AND PROCEDURES

6.1 Release to Seller. Escrow Agent shall release the Holdback Funds (or portion) to Seller upon receipt of:

(a) Written certification from Seller of completion;

(b) Written approval from Buyer (not unreasonably withheld);

(c) Supporting documentation:

• ☐ Paid invoices and contractor receipts
• ☐ Lien releases/affidavits (including statutory lien waivers per Property Code Ch. 53)
• ☐ Final building inspection sign-off
• ☐ Code compliance letter
• ☐ Updated title search or title endorsement
• ☐ Foundation warranty documentation
• ☐ Tenant vacating confirmation
• ☐ Final tax statement or proration adjustment
• ☐ HOA/POA clearance letter
• ☐ Other: [________________________________]

(d) Joint written release instructions signed by both parties.

6.2 Release to Buyer. Escrow Agent shall release to Buyer if:

(a) Seller fails to satisfy conditions by the Holdback Deadline;
(b) Seller provides written notice of inability to complete;
(c) Court order; or
(d) Joint instructions directing release to Buyer.

6.3 Partial Release. Permitted upon satisfaction of individual conditions per allocated amounts.

6.4 Cost-to-Complete Option. Upon Seller default:

☐ Full release to Buyer
☐ Cost-to-complete to Buyer, balance to Seller
☐ Direct payment to contractors upon Buyer authorization

6.5 Holdback Deadline. All conditions must be satisfied by [__/__/____] (the "Holdback Deadline"), being [____] calendar days after closing.

6.6 Extension. Only by mutual written agreement before the Holdback Deadline.

6.7 Disbursement Timing. Escrow Agent shall disburse within [____] business days (default: five (5)) of receiving all required documentation.

ARTICLE 7. INSPECTION AND VERIFICATION

7.1 Buyer's Inspection Right. Buyer may inspect upon [____] hours' notice (default: forty-eight (48) hours).

7.2 Verification Standards.

☐ Buyer's personal inspection and written approval
☐ Licensed Texas contractor
☐ Licensed professional engineer (Texas PE)
☐ Independent inspector mutually agreed upon
☐ Municipal inspection sign-off
☐ TREC-licensed real estate inspector
☐ Other: [________________________________]

7.3 Inspection Costs. Borne by: ☐ Seller ☐ Buyer ☐ Shared equally

7.4 Dispute Over Completion. Written notice of deficiency within [____] calendar days (default: ten (10)) of inspection.

ARTICLE 8. INTEREST ON HOLDBACK FUNDS

8.1 Interest Allocation. If held in an interest-bearing account:

☐ To party receiving Holdback Funds upon release
☐ Entirely to Seller
☐ Entirely to Buyer
☐ As follows: [________________________________]

This Section 8.1 constitutes the "specific written escrow agreement" required by Texas regulations for disposition of interest on escrow funds.

8.2 Tax Reporting. The party receiving interest reports as income. Escrow Agent issues IRS Form 1099-INT. Note: Texas has no state income tax; federal reporting applies.

Buyer's SSN/EIN: [________________________________]
Seller's SSN/EIN: [________________________________]

8.3 FIRPTA Withholding. If Seller is a foreign person, FIRPTA withholding applies under 26 U.S.C. § 1445. Addressed at closing, separate from this Holdback.

ARTICLE 9. ESCROW AGENT DUTIES AND LIABILITY

9.1 Ministerial Capacity. Escrow Agent acts solely in a ministerial capacity.

9.2 Standard of Care. Escrow Agent not liable except for willful misconduct or gross negligence.

9.3 Reliance on Instructions. May rely on documents believed genuine.

9.4 Conflicting Instructions. Upon conflicting instructions, Escrow Agent may:

(a) Hold funds pending joint instructions or court order;
(b) File an interpleader action in Texas district court and deposit funds with the court; or
(c) Take other action permitted by law.

9.5 Indemnification. Buyer and Seller jointly and severally indemnify Escrow Agent from claims arising from performance, except for willful misconduct or gross negligence.

9.6 Resignation. Thirty (30) days' written notice. Holdback Funds transferred to successor or deposited with court.

9.7 TDI Audit Compliance. Escrow Agent acknowledges that TDI may audit escrow accounts to ensure all escrow funds are accounted for and proper controls are in place.

9.8 Escrow Agent Fees.

Fee amount: $[________________________________]
Payable by: ☐ Buyer ☐ Seller ☐ Split equally ☐ Per Contract terms ☐ Other: [________________________________]

Note: In Texas, title insurance premium rates are promulgated by TDI and are uniform statewide. However, escrow holdback administrative fees are separately negotiable.

ARTICLE 10. DISPUTE RESOLUTION

10.1 Negotiation. Good faith negotiation for [____] calendar days (default: fifteen (15)) after written notice.

10.2 Mediation. If unresolved:

☐ AAA (Texas office)
☐ Texas Association of Realtors mediation program
☐ Local bar association mediation
☐ Other: [________________________________]

Mediation costs shared equally. Note: TREC-promulgated contracts require mediation as a prerequisite to other dispute resolution.

10.3 Binding Resolution. If mediation fails:

☐ Litigation in the District Court of [________________________________] County, Texas
☐ Binding Arbitration per Texas Civil Practice & Remedies Code Ch. 171, administered by [________________________________] in [________________________________] County

10.4 Interpleader. Escrow Agent may file interpleader in district court. Costs from Holdback Funds or as court directs.

10.5 Attorneys' Fees. The prevailing party shall be entitled to reasonable attorneys' fees per Texas Civil Practice & Remedies Code § 38.001 (for breach of contract).

ARTICLE 11. DEFAULT AND REMEDIES

11.1 Seller Default. Failure to satisfy conditions by the Holdback Deadline. Buyer may direct release and pursue Contract remedies.

11.2 Buyer Default. Unreasonable withholding of approval. Seller may invoke dispute resolution.

11.3 Remedies Cumulative. All remedies cumulative.

11.4 Specific Performance. Either party may seek specific performance pursuant to Texas law given the unique nature of real property.

ARTICLE 12. TEXAS-SPECIFIC TAX AND RECORDING PROVISIONS

12.1 No State Income Tax. Texas does not impose a state individual income tax. Federal tax obligations apply.

12.2 Texas Franchise Tax. If either party is a business entity subject to the Texas franchise tax (Tax Code Ch. 171), that party is responsible for its own franchise tax compliance. The Holdback arrangement does not create a separate taxable entity.

12.3 Ad Valorem Tax Proration. Texas property taxes are assessed as of January 1 and are due by January 31 of the following year. Taxes are prorated at closing based on:

☐ Current year assessed value and prior year tax rate
☐ Estimated current year taxes
☐ Other: [________________________________]

Note: If the Property benefits from an agricultural (Ag) exemption, timber exemption, or wildlife management exemption, rollback taxes under Property Tax Code § 23.55 may apply upon change of use, and the parties should address responsibility for rollback taxes in the Contract.

12.4 Transfer Tax. Texas does not impose a state real estate transfer tax on the conveyance of real property.

12.5 Recording. The deed shall be recorded with the County Clerk of [________________________________] County, Texas. Recording fees are set by Local Government Code § 118.011.

12.6 Title Insurance. Texas title insurance premiums are regulated by TDI and are uniform statewide. The title policy commitment issued in connection with the transaction is issued by [________________________________] (underwriter).

ARTICLE 13. REPRESENTATIONS AND WARRANTIES

13.1 Seller Represents and Warrants:

(a) Authority to enter this Agreement;
(b) Holdback Conditions accurately described;
(c) Commercially reasonable efforts to satisfy conditions;
(d) Seller's Disclosure Notice under Property Code § 5.008 has been provided (or exempt);
(e) All known defects, liens, and violations disclosed;
(f) HOA/POA addendum (if applicable) provided per Property Code § 5.012;
(g) Seller has not assigned or encumbered the Holdback Funds.

13.2 Buyer Represents and Warrants:

(a) Authority to enter this Agreement;
(b) Will not unreasonably withhold approval;
(c) Will promptly inspect and respond.

13.3 Escrow Agent Represents and Warrants:

(a) Licensed by TDI to act as escrow officer or operates under proper authority;
(b) Will maintain Holdback Funds in compliant escrow account;
(c) Maintains required surety bond/deposit per Insurance Code § 2652;
(d) Subject to and compliant with TDI audit requirements.

ARTICLE 14. NOTICES

14.1 All notices in writing, delivered by:

(a) Personal delivery;
(b) Certified mail, return receipt requested;
(c) Overnight courier; or
(d) Email with delivery confirmation (if agreed).

14.2 To addresses in Article 1.

14.3 Deemed received: personal delivery - date of delivery; certified mail - three (3) business days; overnight courier - next business day; email - date of confirmed delivery.

ARTICLE 15. GENERAL PROVISIONS

15.1 Governing Law. Laws of the State of Texas.

15.2 Venue. District Court of [________________________________] County, Texas.

15.3 Entire Agreement. This Agreement and the Contract constitute the entire agreement.

15.4 Amendments. Written and signed by all parties.

15.5 Severability. Invalid provisions severed.

15.6 Waiver. In writing only.

15.7 Counterparts/E-Signatures. May be executed in counterparts. Electronic signatures valid under Texas Uniform Electronic Transactions Act (Business & Commerce Code Ch. 322).

15.8 Assignment. No assignment without written consent.

15.9 Time of the Essence. Time is of the essence.

15.10 TREC Contract Integration. If the underlying transaction uses a TREC-promulgated contract form, this Agreement is intended to supplement (not conflict with) the TREC form. In the event of conflict with the TREC contract, the parties shall determine priority based on the terms of the applicable addendum or special provisions.

ARTICLE 16. EXHIBITS AND ATTACHMENTS

☐ Exhibit A: Scope of Work / Repair Description
☐ Exhibit B: Cost Estimates / Contractor Bids
☐ Exhibit C: Title Commitment
☐ Exhibit D: Inspection Report(s)
☐ Exhibit E: Survey
☐ Exhibit F: HOA/POA Resale Certificate
☐ Exhibit G: [________________________________]

ARTICLE 17. SIGNATURES

IN WITNESS WHEREOF, the parties execute this Agreement as of the Effective Date.

BUYER:

Signature: ____________________________________
Printed Name: [________________________________]
Title (if entity): [________________________________]
Date: [__/__/____]

SELLER:

Signature: ____________________________________
Printed Name: [________________________________]
Title (if entity): [________________________________]
Date: [__/__/____]

ESCROW AGENT:

Signature: ____________________________________
Printed Name: [________________________________]
Title: [________________________________]
Company: [________________________________]
TDI Escrow Officer License No.: [________________________________]
GF/Escrow No.: [________________________________]
Date: [__/__/____]

ACKNOWLEDGMENT OF RECEIPT

Escrow Agent acknowledges receipt of $[________________________________] in Holdback Funds on [__/__/____], deposited into escrow account no. [________________________________] at [________________________________] (financial institution) in compliance with TDI escrow account requirements.

Escrow Agent Signature: ____________________________________
Date: [__/__/____]

This Texas-specific template is provided for informational purposes only by ezel.ai and does not constitute legal advice. Texas escrow officers must be licensed by TDI under Insurance Code § 2652. Title insurance rates are promulgated statewide by TDI. This template must be reviewed by a Texas-licensed attorney before execution.