How to Avoid Falling Out of Escrow When Selling a Home

For many sellers, the scariest part of the sale process is the fear that the deal won’t go through.

While most of the time real estate agents, lenders and escrow officers can keep everything on track, sometimes things go wrong. As a seller, you don’t want to find out on closing date that something important was overlooked.

The escrow process for a seller

Escrow is the period of time from when you accept a buyer’s offer and earnest money on the home you’re selling to the time it closes. It can last 30 to 45 days, and during that time, you might feel like you’re living in limbo waiting for the buyer to get everything in order.

As a seller, there isn’t much you can do to hurry the process. You’ll need to accommodate home walk-throughs for inspectors, an appraiser, and probably the buyers. Beyond that, you’ll need to be aware of what happens during the escrow process and work with your real estate agent to keep things on track.

Occasionally, a deal will ‘fall out of escrow.’ Knowing why this sometimes happens, can prepare you for the possibility, and you’ll be able to communicate with everyone involved to keep these things from happening.

Why real estate deals sometimes fall out of escrow

There are a lot of reasons why contracts don’t work. Timing, inspection and appraisal issues and issues with the title are all risks.

Buyers don’t qualify for the loan they applied for

The most common reason that buyers can’t close on the home is that they don’t qualify for the loan they applied for. This can be because they didn’t get in all of their documentation in time.

Sellers can communicate with their agent to make sure the buyers and the lenders are both submitting and asking for necessary documentation in a timely manner. This will ensure the lenders have time to approve the loan before the closing date.

You can also try to work with buyers who are already pre-qualified for a loan. This means at least some of the mortgage loan process is already underway, and the lender considers this buyer a good investment for a certain amount.

Inspection and Appraisal Issues

What happens when a home inspection reveals a nasty surprise?  Most of the time the buyer and seller renegotiate the terms of the purchase agreement. The seller either agrees to make the repairs or discount the sale price to cover the costs or the buyer decides to move forward without the repairs.

Problems occur when the buyer and seller can’t agree what to do about it. Sellers can address this before the home goes on the market by ordering an inspection themselves and addressing any issues that come up. The price of paying for an inspection and repairs might outweigh the cost of losing a deal.

This can also address the possibility that an appraisal will come in too low. If you address major issues like a cracked foundation or leaky roof before putting your home on the market, you can feel more confident when the appraiser comes for the walk-through.

Resolving other Issues

Review all the documents as soon as they’re available to catch possible errors. Even a typo can be a disaster if it’s not taken care of right away.

Take care of title issues, too. Make sure there are no liens from back taxes or problems with relatives who may not want to sell the house.

Also, request that the buyers pay their down-payment with a cashier’s check. This can keep the deal from falling if there’s a problem with their banking system and the money can’t be wired.

Escrow is a long, difficult process no matter whether you’re buying or selling. Depend on your real estate agent to walk you through these possibilities if they happen, and be proactive. Paying attention to the details can help keep your real estate deal safe through closing.