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What could possibly go wrong during escrow?

By
Real Estate Agent with Alain Pinel BRE 01367196

What could possibly go wrong during escrow?

As I was sighing that I wish that I would have a hassle-free and smooth transaction, someone asked me....

What could possibly go wrong during escrow?

Buyer does not qualify for the loan


Buyer loses job or is unexpectedly relocated.


Property does not appraise for the price that the buyer has offered


Lender/underwriter doesn't complete loan process on time, or has more conditions to resolve before approving loan. For example, an FHA loan appraiser may identify Section 1 items that need to be cleared.


Buyer does not clear his contingencies in time. And even when the seller issues Notice to Perform, buyer does not comply

 

Significant repair issues are identified during inspections.  Buyer requests credits/repairs or price reduction. Seller refuses. Negotiation breaks down.no whining

 

Buyer does not deposit earnest money into an escrow account in spite of constant follow ups

 

Cancellation of contract is instituted, but one party refuses to sign or to allow deposit to be returned to buyer


Buyer's own house was under contract -- but HIS buyer backs out and cancels that sale


Buyer or Seller gets cold feet and wants to cancel agreement


One of the parties to the agreement gets deathly ill...and sometimes, somebody passes away

 

A day before close of escrow, one party refuses to allow transaction to proceed due to unfulfilled commitment (I know of a million dollar sale that was delayed because the seller didn’t deliver, per prior agreement,  a permit signed off/approved by the city bulding inspector)

 

House suffers a calamity --- fire, burglary, hurricane, etc --- during escrow period and could not be delivered in the same condition as when the buyer wrote the offer

 

Seller was discovered to not have legal authorization to sell the property


Mechanics liens are filed against the property


Other parties, such as heirs, file suit to halt the sale


And of course, there are the other myriad challenges with other types of sales like short sales. And that’s another whole book!


Indeed, what are the various events that could possibly derail a transaction?

.

Comments(57)

Michael Blue
Home Smart Realty West - Encinitas, CA
REALTOR - 760-889-8877, Encinitas/Carlsbad
Pacita- when I was a baby agent I was told the work really started once we went in to escrow. The one thing that gets me more than anything else however is the renegotiating of the sales price due to inspections. One of the things I try to do upfront for the seller is to get them to order the termite report pronto that way we know what repairs from that inspection will be due and can proceed in advance and it saves the seller money. Spending time doing repairs, cleaning and staging to get the house ready for sale pays off in the long run.
Sep 23, 2012 10:24 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Michelle -- would love to see your list

John -- Can't spend that money before the check clears

Ginny -- I had one hassle-free closing this month. The rest are challenging for various reasons

Ed and Tracy -- doing out best for our clients also involve being cool calm and collected

Mike --- I've encountered many of these challenges. The others, my friends have experienced, including having the seller die just before close of escrow

Sep 23, 2012 10:34 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Wayne and Jean -- we never know what's going to come up

Christiansen team -- it helps to be prepared, and to also tell clients that many of these challenges are not completely unexpected

Frank -- you raised another question....does a closed escrow guarantee we'll get paid soon?

Michael -- the negotiation hardest to overcome when one is faced with stubborn and unreasonable parties.

Sally and David -- you just gave me an idea....thanks!

Sep 23, 2012 10:51 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Randy -- what a reminder of what is involved....in the spinning wheel, one never knows where it stops. And all our transactions are like one gigantic wheel

Mark -- I can only imagine what happens to all the escrows when hurricanes hit!

Susan -- smooth sailing doesn't seem to apply to real estate transactions

Lisa -- apparently, this list may not be long enough since there are other situations I haven't mentioned

Lucas -- thanks for the kind words!

 

 

Sep 23, 2012 11:04 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Charlie -- when it comes to clients who don't see when a deal is good enough but who wants more, more, more...then maybe it's time for the agent to "fold 'em" and say, "Next!"

Harry -- making follow up phone calls is an absolute necessity. Sometimes, it's the squeaky wheel that gets attention

Richie -- you're right. It's a matter of IF as much as WHEN an escrow closes.

Tatyana -- since so many of these are the new "normal"....we just have to keep plogging along!

Gretchen -- and when the escrow doesn't close...we've lost all that time and effort and money.

 

Sep 23, 2012 11:09 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Rob -- there's only one way to be in this job: be optimistic. That's why when one falters, we always tell ourselves, "NEXT!". I truly believe there's a good reason for every thing.

Nancy -- during these times, it truly helps to be an optimist. It takes us to our happy place. And when that fails, have a glass of wine, not whine!

Adrian -- we never know what's going to happen from escrow to escrow. Some that we expected to be slam dunk and smooth sailing could be the most treacherous of all!

Jeff --- I've had buyers who were moving right along on an escrow...then boom! They decide it's better for them to get a divorce instead.

Gary -- someone dying in the middle of an escrow is not unusual. I've also heard of one where the elderly seller was diagnosed with Alzheimer's disease, and as such was not in full control of her faculties.

Sep 23, 2012 11:16 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Kathy --- yes, it does show what we have to deal with from day to day. We're tough, and the going gets rough, the tough get going!

Chris Ann -- Absolutely...one of the parties could be hospitalized, or die unexpectedly. Happened and happens!

Bryan -- lender/underwriter not completing his part in time is a pet peeve....totally preventable. After the escrow closes, I always encourage the client to give feedback. And I make a mental note of whom NOT to use

Satar --- when it closes escrow, that's when it goes on the books!

Karen -- a realtor's job is never done until the paperwork is done :)

Sep 23, 2012 11:43 AM
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA

Pacita:

Now a days it seems that closing an escrow on time is not possible.  Some thing always comes up to delay the close.  It can be very frustrating.

Sep 23, 2012 12:16 PM
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTORĀ®, Brick & Howell NJ Homes for Sale

Hi Pacita. There certainly are a LOT of things that can go wrong. I hope you've not experienced most of what you've listed. As others have mentioned, this is why a good agent is needed in any sale.
Bruce

 

Sep 23, 2012 12:16 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M
Pacita - I would say you've scratched the surface of what can go wrong in a transaction. There are so many things.
Sep 23, 2012 02:20 PM
Sharon Senger
tcDocs - Seattle, WA
Licensed Transaction Coordinator

Pacita, thank you for this post and for listing some of the things that can go wrong with a transaction.

I work as a Transaction Coordinator and it is my job to make sure that I minimize the risk of not closing due to missed dates and contingencies. Also keeping in touch with Lenders to ensure that the loan is being processed and there are no problems.

Agents who work with Transaction Coordinators see the value of using this service as it allows them to focus on selling more homes and not dealing with the paperwork.

Have a wonderful day!

 

Sep 24, 2012 01:54 AM
Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota/Wisconsin Real Estate Expert

It seems like there is something new we discover that we did not know was possible the more business you do.

Sep 24, 2012 02:56 AM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

It's amazing how many things can go wrong.  I've never had a "quiet" escrow.  Things have almost always worked out, but something almost always comes up.  Sometimes its big, sometimes its small. 

Sep 24, 2012 02:59 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Jim -- thanks for the kind words

Sandy -- you said it. It is through adverse conditions that we prove our worth to our clients

Ed -- you're right. Certain things we can handle. The rest is in God's hands

Carla -- yep, we never know when and what could happen to an escrow. Seems like there's something new every day

Ginger -- there's a realtor who's 85 years old, and she's still doing open houses. Wonder if I can hang on that long

Sep 24, 2012 03:21 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Michael -- having that headache now. Sellers refused to get their inspections. Buyers did, and requested huge credit. Sellers refused. Wants to relist at same price in spite of what was found. Big SIGH

Evelyn -- that's why whenever I have a hassle-free closing, I celebrate!

Bruce -- when things go wrong, an agent with nerves of steel is worth his weight in gold

Christine -- by all means...add to the list. We need to show our clients what we have to go through

Chuck --- the longer we stay in business, the more we learn, experience especially since everything else changes.

Ruthmarie -- I've had some smooth transactions. But they are in the minority.

Sharon -- indeed, a transaction coordinator or personal assistant can help us in a huge way

 

 

Sep 24, 2012 03:32 AM
Spectrum Inspection Group
Spectrum Inspection Group - Las Vegas, NV

This is why we no longer bill through escrow.  Once the deal falls through people suddenly think they have no obligation to pay and there are SO many reasons why deals fall apart these days.

Sep 24, 2012 05:36 AM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Spectrum

Totally understandable, and totally fair. At least when you do your inspections, you get paid for the work

For us REALTORs, we can do a lot of the work pre- and during escrow, but when the escrow falls apart, we don't get paid a cent!

Sep 24, 2012 08:39 AM
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Along the lines of our 21 things that can go wrong after escrow. Good luck and Happy Posting

Sep 25, 2012 01:25 PM
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

I have often thought about writing a book on this subject many times.  Great info.

Sep 29, 2012 07:23 AM
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Sure is a lot to go wrong but hopefully it won't. Being parpared can avoid a lot of this.

Oct 01, 2012 12:54 PM