What can go wrong when closing escrow?
Buying a home is among the most stressful life events that a person goes through. Waiting for your home to close escrow can feel like an eternity, especially if something goes awry. Having an experienced team on your side goes a long way, this includes your real estate agent, escrow officer and lender. But it is also imperative that you as the client stay informed on all aspects of your transaction and what can impact the closing of your property.
One of the main culprits in holding up the close of escrow is inspections. Most offers include inspection contingencies, allowing the buyer to back out of the sale if the inspection reveals serious issues. Without such a contingency, you could lose your earnest money if you should back out as the buyer. If there are issues unveiled by the inspection, the sellers have the option to either have the home repaired themselves or credit the money so that the buyer can repair the home. This could potentially delay the closing of the transaction. Most offers also include pest inspections. If a pest inspection uncovers any evidence of infestation, the areas of concern would need to be rectified before the close of escrow.
Appraisals can also greatly impact the timely closing of escrow. The bank will have the home appraised in order to protect its interest in the home. The objective of an escrow is to ensure that the home is worth at least as much as it is being purchased for. If the appraisal comes in low, the seller of the home will have to lower the selling price, or the buyer will have to pay cash to make up the different, if the lender will allow. Getting a second opinion, from a different appraiser, is a good option if the appraisal result is not as expected.
Another common issue in closings is error in documents. Any error in the transaction documents can create problems and hold ups in the closing process. Such errors can be as simple as a misspelled name or street address or a more serious error, such as an incorrect loan amount. To alleviate such mistakes from holding up closing, you should ask for every piece of paperwork in advance. Once you receive documents, immediately read them, carefully checking that everything is correct. As a buyer or seller it is important to review your documents and double check that all numbers, names, addresses and loan amounts are correct. If there is something that seems off or something that you don’t fully understand, ask questions!
Issues on the title of the home can also delay the close of escrow. The title company will complete a title search and issue title insurance during the escrow process. A title search ensures that no one else has claim on the property being sold. Common issues with title that arise range from IRS or state taxes being owed to a lien on the property to the home being the subject of a family dispute or law suit. As a buyer, any issue on title can greatly affect your closing date. Soon after escrow is opened, the title company issues a preliminary title report. Request a copy of the report from the title company or your lender for personal review. Title insurance will ensure that you are protected if the title company missed anything in the title search.
Buying or selling a home is stressful for all parties involved in the transaction. There are many moving parts involved in a real estate transaction. We have addressed just a few of them here. For even the seasoned homebuyer, each transaction consists of a multitude of factors, many of which may be confusing or unclear. In order to have a successful experience, and close escrow on time, educate yourself on the escrow process and be as involved in your transaction as possible.
Eric Jon Maiss is the owner of Title Service and Escrow, which has been serving Lyon and Mineral Counties since 1971. For more information, call the Yerington office at 775-463-3518 or the Fernley office at 775-575-2286.