source:
  type: guide
  id: va-m26-7-ch09-t10
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 10 — Escrow
    for Postponed Completion of Improvements
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 10 — Escrow
    for Postponed Completion of Improvements.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch09-t10-full
  canonical_id: va-m26-7-ch09-t10-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 10 — Escrow for
    Postponed Completion of Improvements
  type: do
  tags:
  - regulator-direct
  - va
  - va-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 10 — Escrow
      for Postponed Completion of Improvements
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 23782f6842a5daf5
    fetched_at: '2026-05-23T01:53:53Z'
    content_hash: sha256:b7c7fcb001b1097e51e4479c70f74c0d981cc1a7a38109e8cd455e205071d9e8
    paragraph_quote: '10. Escrow for Postponed Completion of Improvements Change Date
      July 30, 2019 • This chapter has been revised in its entirety. a. General In
      some instances, it may not be possible to complete certain items before the
      Veteran wishes to move into the property. The escrow of funds can permit the
      Veteran-purchaser to gain occupancy of the dwelling prior to completion of certain
      items which must be postponed due to weather conditions or other circumstances.
      Such items include, but are not limited to: • walkways, driveways, and retaining
      walls, • exterior painting, • landscaping, and • garages. b. Escrow of Funds
      to Complete Unfinished Work VA may permit the escrow of funds necessary to complete
      the unfinished work later, and still issue evidence of guaranty. An escrow involves
      the following: • withholding 1 1/2 times the dollar amount necessary to complete
      the postponed items (as estimated by a third party) from the proceeds due the
      seller at closing, • holding the escrowing funds in a proper, secure manner,
      and • releasing the funds once the postponed items have been satisfactorily
      completed. c. Establishing an Escrow Fund To establish an escrow, the following
      must apply: • construction of the dwelling must be complete and the house must
      be suitable for immediate occupancy, • postponement of the improvements must
      be beyond the control of the builder/seller, • the duration of the postponement
      must not be unreasonable (usually 90 to 120 days), and • the amount escrowed
      must be at least 1 1/2 times an estimate of the amount needed to complete the
      work. Continued on next page VA Pamphlet 26-7, Revised Chapter 9: Legal Instruments,
      Liens, Escrows, and Related Issues 9-20 10. Escrow for Postponed Completion
      of Improvements, continued c. Establishing an Escrow Fund, continued Lenders
      are not required to escrow funds when: • the incomplete work is limited to the
      installation of landscaping features due to inclement weather (lawns, shrubbery,
      etc.), • the estimate of the cost to complete the work is not greater than $2,500,
      and • there is adequate assurance that the work will be completed timely and
      satisfactorily (usually 90 to 120 days). d. General Procedures No prior approval
      of VA is required to escrow funds. Lenders are responsible for establishing
      escrows in accordance with the guidelines presented in this topic. Lenders are
      also responsible for assuring that the postponed work is completed. Once the
      loan closes, VA will randomly monitor cases to ensure completion of escrowed
      items. Step Action 1 Close loan and escrow the required funds. 2 Upload the
      closed loan package into WebLGY for issuance of guaranty with: • lender evidence
      of an escrow agreement, or • a completed VA Form 26-1849, Escrow Agreement for
      Postponed Exterior Onsite Improvements. 3 Release escrowed funds when work is
      satisfactorily completed, as evidenced by doing the following: • Complete VA
      Form 26-1839, Compliance Inspection Report, indicating the postponed work has
      been satisfactorily completed, or • if the postponed work is minor, uncomplicated,
      and not involving structural issues, provide written certification from the
      lender indicating the work has been completed, and a statement from the Veteran-purchaser
      that he or she is satisfied with the work. Continued on next page VA Pamphlet
      26-7, Revised Chapter 9: Legal Instruments, Liens, Escrows, and Related Issues
      9-21 10. Escrow for Postponed Completion of Improvements, continued e. Letter
      of Credit A commercial letter of credit may be used in lieu of a cash escrow
      provided: • the dollar amount of available credit is at least 1 1/2 times the
      estimated cost of the postponed work, • a trust agreement describing the duties,
      obligations, and responsibilities is submitted (VA Form 26-1849 may be used),
      • the letter of credit is irrevocable and a valid and binding obligation on
      the issuing bank and extends at least 6 months beyond the date for completion
      of improvements, and • a copy of the letter of credit and trust agreement is
      furnished to the appropriate VA office so a control can be maintained on the
      available credit. VA Pamphlet 26-7, Revised Chapter 9: Legal Instruments, Liens,
      Escrows, and Related Issues 9-22'
  judgment: false
