Real Estate: How to Ensure a Sucessful Close of Escrow

If you are a buyer or seller involved in a real estate transaction, waiting for your escrow to close, you may discover a few bumps along the way, if you ignore the following red flags, warnings that could delay your close of escrow.

Depending on the terms of your purchase contract, a buyer's earnest deposit can be in jeopardy if the escrow fails to close on the specific close date expressed in the contract. Normally this is because of some delay caused by the buyer. In those cases, if you have a seller willing to lose the deal, in exchange for keeping the earnest deposit, the buyer may have a problem.

If the seller delays the close, the buyers won't be worrying about the earnest deposit, but there might be a concern over the interest rate of the buyer's loan. Normally when a buyer locks in an interest rate, it is for a specific time frame. Should the escrow go beyond the contract's close date, it might exceed the date of the lock. This could result in a higher interest rate for the buyer.

Therefore, it is important for buyers to be aware of any red flags, so they can make realistic goals for their close of escrow, and when to lock their interest rate.

If the sellers are getting a divorce it could cause delays. There could also be delays if the seller is recently married. In the latter case, there will be questions, such as, will the new spouse be a seller in the transaction, or will a quick claim deed need to be signed, relinquishing any community property interest. If one of the sellers is deceased (either prior to or during the escrow) there will be matters to address. There may be probate documents and death certificates required. All of this paperwork can lengthen an escrow.

If the property in question has a new swimming pool, a room addition or patio, there will be a red flag. It is necessary to determine if all construction liens have been paid off, and if a project is very recent, a lien may not yet be showing up on the records.

With the current housing situation, it is not uncommon for homeowners, who are threatened with foreclosure, to list their property for sale. Should the house enter foreclosure during the escrow process, it could cause additional delays, and possibly an end to the escrow.

If buyers change their lender at the last moment, or type of title insurance, it can cause delays. And if the seller fails to complete necessary requirements, such as pumping a septic system, or providing a Comprehensive Loss Underwriting Exchange Report to the buyer, delays may occur in some states.

Before agreeing to and entering into a purchase contract, check for the red flags, to see if any issues might make your recommended close of escrow unrealistic. The following situations can mean additional paperwork and delays; bankruptcies, judgments, easements or encroachments, trusts, and probates.

For a successful and timely close of escrow, don't delay in addressing all the pertinent questions.