Completion Escrow Account for Landscaping and Driveway

Should Monies be Escrowed for Work to be Completed after a House Mortgage Closing

By Mark J. Donovan

Question: Mark, Should I require a completion escrow account or some type of mortgage escrow account be set up for holding back monies from the builder until the landscaping and driveway are completed? I am in the process of building a new home and the home is not expected to complete until the dead of winter. Consequently the landscaping and driveway will not be completed until spring when the ground has unthawed. Since the closing will be in February I am debating asking the builder or my lending bank to set up a mortgage escrow account or completion escrow account to hold back the monies necessary for completing the landscaping and driveway. What are your thoughts on this? CD

Answer: CD, You should absolutely require a completion escrow account to be set up for the funds necessary to complete the landscaping and driveway when the weather warms. Mortgage escrow accounts are normally setup by the mortgage bank to collect taxes, insurances and other fees from the buyer that will be due shortly after the closing. Likewise, a mortgage lender, or the closing attorney, should also want to set up a completion escrow account for construction work that will not be completed by the time of closing.

It is in both the interest of the lending bank and the buyer to do this. A completion escrow account is normally reserved for exactly the type of items you mention.

With escrow accounts a trusted and independent third party receives the funds from the buyer or lending institution and then disburses the funds to the particular parties per the stipulations in the contract. For example, the buyer / mortgage lender will deliver to the completion escrow agent the funds necessary to pay the builder. Upon the completion of the landscaping and paving of the driveway by the builder the escrow agent will pay the builder with the funds in the completion escrow account.

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The funds held back in the driveway and landscaping completion escrow account should be of a value that will allow you or the bank to go out and hire a 3rd party to complete the work in the event it is not completed by the builder. Consequently the monies set aside in the escrow account should be at a higher amount than what the builder says it will cost him to complete these projects. In addition, there should be a complete date, or a maximum number of days after closing to complete, included as part of the completion escrow account agreement.

This way, in the event it is not completed by the specified date, the monies can be returned to the homeowner or lending bank to allow them to hire a 3rd party contractor to finish the work.

Though water under the bridge at this point, since you are already under contractual agreement to buy the home upon its completion, it’s always wise to address these types of issues up front during the home construction contract negotiations. Besides identifying the possible items that may not be able to be completed prior to the mortgage closing, the dollar figure for the completion escrow funds should also be agreed upon.

Completion Escrow Account for Landscaping and Driveway

Likewise the expected finish date should also be included. This information should be included in the purchase and sales agreement so that the mortgage lender is aware of the need to include these items in a completion escrow account.

For more help on building a new custom home, see’s New Home Construction Bid Sheet. The New Home Construction Bid Sheet provides you with the knowledge on how to plan a custom home building project, and what to look for when hiring contractors for your new home construction. It also includes a detailed cost breakdown table and spreadsheet for estimating your own new home construction building costs.

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