Why 20 to 24% of Escrows Fall Apart
By MICHAEL EDLEN | Special to the Palisadian-Post
One of every four to five escrows fall out. Real estate agents who are most effective keeping escrow intact are those who have developed a long-term perspective and are able to assist the various parties involved to also take a long-term view of situations and problems.
The skills agents must have to really accomplish this consistently and successfully include being clear and honest thinkers, resourceful problem solvers, emotional buffers, and supportive therapists. Communication skills required include being detailed, focused on all issues, patient and keeping a healthy sense of humor.
Any experienced agent knows that marketing or locating properties is probably less than 25% of the work. The majority of effort during the transaction is making sure it closes.
It is the agent’s responsibility to ensure this by coordinating a complex series of events. This involves working with many service providers: escrow officers, title company people, pest control inspectors, retrofitters, building inspectors, supplemental inspectors of sewer lines or chimneys, and so forth. Of course, the agent also coordinates numerous disclosures, plus many other required documents.
Incorrect handling of any aspect of the transaction can cost the client both time and thousands of dollars in the process, or far worse, in any later court action. Agents who use detailed checklists of all the steps required to close the escrow are best able to prevent problems or to assist more effectively in resolving any that arise.
Here are some examples of the variety of issues I have seen arise unexpectedly during escrow:
- Non-disclosed, non-permitted additions to a home.
- Boundary lines not being where seller claimed (it is far too easy to assume that a fence or wall is on the property line).
- Seller’s decision to remove window treatments or chandeliers without previous disclosure.
- Seller’s insurance claim a few years ago for water damage (such as from an overflowing toilet) is revealed.
- Seller camouflaged musty smell with candles and air fresheners, and buyer subsequently discovered mold.
- Seller not mentioning that the house next door is soon-to-be a new home construction site.
- Seller reacts defensively to some opinions of the buyer’s inspector.
- Seller unwilling to allow access for family members, friends or decorators to view the property.
- Discovery that a deceased spouse is still on title.
- A change of marital status during escrow, which can create title transfer problems.
- Seller discovers they need several weeks more time before they move, and buyer is unable or unwilling to agree to the change in schedule.
- The seller or listing agent delays access to property for inspection or appraisal.
- The seller underestimates the difficulty in obtaining a co-owner’s signatures.
- Seller leaves town without establishing a power of attorney in their absence.
- Seller decides not to complete the repairs agreed to in the contract.
- Buyer’s expectation that certain items would be included with the property (one escrow nearly fell apart over an English dart board!).
- Buyer discovers that far more termite and dry rot work is required than expected.
- Buyer discovers that the lot size is significantly less than represented.
- Buyer hears unpleasant reports of a neighborhood nuisance.
- Buyer becomes aware that street or park lights shine in the windows.
- Buyer’s resentment after seller’s denial of access to the property during requested times.
- Buyer or seller reactions to incomplete or inaccurately communicated information by one of the agents.
- Unstated assumption by buyer that termite removal is seller’s responsibility.
- Buyers expecting access to the property frequently and with little notice.
- Buyer does not properly document “gift money” used as part of a down payment.
- Buyer falsifies information on loan application or neglects to report child support information.
- Gift donor changes mind and revokes payment.
- Income verification is lower than stated on loan application.
- The buyer or loan broker does not submit mandatory completed paperwork to the lender in time.
- Buyer’s children fight over who gets which bedroom.
- Well-meaning relatives cannot believe the price tag.
- Buyer no longer qualifies for a home loan due to rise in interest rates.
- Buyer and seller meet during escrow and have a major disagreement.
- Agent does not explain existence and potential significance of CC&Rs, which may prevent an addition to the house that buyer intended.
- Title company discovers that there is an encroachment on a neighboring property.
- One of the agents unexpectedly becomes unreachable during the escrow.
- Agent fails to obtain all required signatures in a timely manner.
- Escrow does not obtain original signatures before one of the parties leaves the country.
- Escrow fails to notify agents of unreturned signed documents.
- Escrow and agents fail to notice that the buyer’s full deposit is not received.
The list of possible reasons for an escrow falling apart is endless. The loss of an escrow after two or more weeks may be very disappointing to a seller. There is also a significant loss of marketing momentum during the escrow period. And even if the issue or situation does not become a “deal breaker,” the result almost always includes an increase in stress levels for all concerned.
If you have any concerns about possible sale issues, please contact Michael at 310-600-7422 or firstname.lastname@example.org. He has been involved in 1,800-plus escrows.
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