After all the trouble of putting a house on the market, showing the house to numerous buyers, and then going through several rounds of negotiations, a deal has been reached and the house is in escrow… what could go wrong?
The short answer is, plenty. Escrow is a complicated process with many participants and equally numerous moving parts. At the helm of it all should be the Realtors on the transaction guiding the deal to close for both the buyer and seller. In my experience, the three biggest derailments of escrow are as follows:
1) Financing & Appraisal
Next to having an experienced real estate agent, having a trusted and seasoned lender on the buyer’s side is vital to a smooth closing. A lender should always advise buyers to withhold major purchases on credit during the home purchasing process. Additionally, a diligent lender should proactively assist the buyer in fulfilling the underwriting conditions and have the buyer lock in a mortgage rate in a timely manner. An essential piece of lending success is dependent on the appraisal coming in at the agreed upon price. Should that not be the case and the property is under valued, then escrow is at serious risk unless the buyer and sellers can find a solution.
Nearly every real estate deal in current market conditions requires a physical inspection of the property. When a buyer is handed an inspection report that itemizes things that are wrong with the house, from big items to little, it certainly can intimidate the buyer from proceeding. A lengthy report from the buyer’s perspective is equivalent to excess expenditures and additional headaches for the buyer. At this juncture, another round of negotiations could take place requesting the seller for repairs or adjustment to the price to cover for repairs. If negotiations don’t result in a meeting of the minds, then escrow could be in jeopardy and the deal may fall apart.
During the escrow process, the buyer is handed a list of disclosures. While representing the seller, I tend to advise on disclosing more as opposed to less. But it can be a little much for the buyers to digest depending on the severity of the disclosures. The last thing anyone wants to happen is for the buyer to think that they were deceived and that the seller wasn’t forthcoming regarding the property. Regardless, many deals have not come to fruition over items in the disclosure packet or that buyers discovered items that were not disclosed and therefore become suspicious about the property’s shortcomings.
Other issues that can derail closing include:
- Termite inspection reveals serious infestation.
- Title search reveals liens and clouds on title.
- The house is uninsurable.
- Closing is delayed due to errors, contingencies or missing documents.
- Either the buyer or seller simply experiences a change of heart.
The good news once again is that if you have engaged an experienced Realtor to represent you, he/she will likely be have previously faced similar issues on another transaction and be able to help you navigate your way to a successful close regardless. Whether it’s negotiating a request for repairs or connecting the buyer with a diligent lender, your real estate agent is your strongest ally towards a smooth close of escrow.