Why escrows are derailed/delayed: The DEVIL IN THE DETAILS

By
Real Estate Agent with Alain Pinel BRE 01367196
https://activerain.com/droplet/hwd

DEVIL IN THE DETAILS

Why are closings frequently derailed or delayed? Here are some real life situations.

Closing Cost credits.

Buyers want sellers to take responsibility for compliance with government regulations. And for good measure, Buyers request $2,000 in credits on a $620,000 purchase. The request for credit is incorporated in the Request for Repairs or Other Corrective Action form.

$2,000 credit shouldn't be a big deal, right?

But the devil in the details. The credit should be on a separate addendum and it should clearly spell out that it's towards closing credits. Rookie mistake. Addendum was produced. Loan was funded in the morning, special recording in the afternoon.

Missing form.

California contract has section where one itemizes what documents or disclosures are incorporated with the purchase agreement. in this case, the Seller's Property Questionnaire. However, when the contract was given to the lender, said questionnaire was left out.

But the devil in the details. Three days before closing, when the underwriter was doing a final review, she noticed questionnaire was missing. Everything screeched to a stop until that form was produced.

Short sale approval shortfall.

By the time the short sale approval was received after three months, the property taxes for the second half of the fiscal year were due.

But the devil in the details.The closing statement (HUD) didn't reflect the new taxes. The short sale lender negotiator said the HUD must match the worksheet on the Equator system, not the other way around. Any expenses not approved in the short sale approval becomes the responsibility of the seller, the buyer and their agents.

Unpaid taxes.

Sellers were trying to have unpaid IRS tax lien discharged, and as such had not expected nor asked for the taxes to be paid by the short sale lender. Unfortunately, sellers' request for discharge was denied. 

But the devil in the details. Short sale approval was received and did not address tax lien. Buyers, sellers and agents agree to pay off Seller's tax lien to move short sale forward. But the arrangement needed to be approved by the short sale negotiator since the payoff is seen as contribution.

Have you ever heard of this nursery rhyme? 

 

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.

 

 

When it comes to real estate transactions, it's always a good idea to anticipate Murphy's Law --- anything that can go wrong will go wrong --- and be ready for corrective action. Like good boy scouts, we should BE PREPARED.

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Rainmaker
1,143,971
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Finally! A decent post late on a Saturday eve in the AR! Wow I will say this has been the worst night I have seen since joining the rain for quality and content.

Aug 27, 2011 06:36 PM #1
Rainmaker
710,643
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

David

Thanks for your kind comment....

I read a couple of blogs tonight that that seem to invite controversy. So you must have read them, too. Glad to offer a bit of respite from that.

Thanks!

Aug 27, 2011 07:02 PM #2
Rainmaker
1,020,117
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

The devil is always in the details.  At least that is what both my father and my grandfather told me.  I have found that to be true in life.

Aug 27, 2011 07:03 PM #3
Rainmaker
710,643
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Tim --- yes, it's important to be extra careful. The slightest mistake, like the want of a  nail in the shoe, could be costly.

 

Aug 27, 2011 07:12 PM #4
Ambassador
3,101,789
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

The devil is definitely in the details.  I have a deal that fell through because the listing agent didn't get the correct pay offs from the seller when taking the listing.  It's now a Short Sale and we may be starting all over.  Pay off numbers are not trivial.  Get statements.

Aug 28, 2011 05:21 AM #5
Rainmaker
2,190,192
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

Yes, heading these potential problems off at the pass is why we make the big bucks. As for the problem with the IRS lien, I have had those lifted as there is a provision in IRS guidelines online that says they don't apply in cases where is no equity. Well, they don't lift them, per se, they release the property from them.

Aug 28, 2011 05:22 AM #6
Rainmaker
601,337
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Pacita - OY VEY!!!  Welcome to my world and this is exactly why MLOs must get all the i's dotted and t's crossed long before the u/w ever sees anything.  As for the HUD1, I was just telling Elizabeth that I have to be really anal about this document because if it's not perfect, rest assured, the u/w will hold up the docs.

Aug 28, 2011 07:27 AM #7
Rainmaker
710,643
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Chris --- I think both the listing and the buyer's agent should make sure all the nitty gritty details are correctly provided on the right forms. Credits on addendum, not request for repairs is a very important detail.

Elizabeth --- I'll have to find that IRS guideline. THanks for the heads up.

Donne --- as we all know, if there's going to be a hiccup in the process, it will be at the final stage: on the underwriter's desk. So we should all be cognizant of the pitfalls and make sure we avoid them.

Aug 28, 2011 07:37 AM #8
Rainer
162,464
Louise Thaxton NMLS 69996
Fairway Independent Mortgage Corp Louisiana NMLS#2289 Equal Housing Lender - Leesville, LA
Military Mtg Specialist - 866-960-9115 VA FHA USDA

Pacita - GREAT post!  Wow - it is the little things that will kill the deal every time!  You are so right - the devil is the DETAILS! 

Aug 28, 2011 03:27 PM #9
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Rainmaker
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Pacita Dimacali

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