One of the questions that come to mind for a home buyer or seller is “How do I prevent problems in closing my escrow?”

The key to making sure your escrow closing goes smoothly is choosing a great Realtor that will anticipate problems before they happen. In order to stay on track, a great real estate agent uses a checklist of tasks that must be completed before the close of escrow, and then follows up to make sure they are all completed prior to the sellers or buyers going to the Title Company to sign closing papers.

Most issues that delay or prevent closings fall into three categories: loans and appraisals, titles, and home inspections.

1) Loans: Financing falls through at the last minute - An agent needs to help buyers understand that a prequalification letter doesn’t necessarily mean they are preapproved. Because of tighter lending standards and heightened concern about mortgage fraud, there is a lot more paperwork required from the buyer today. Making sure that the buyer gets in all of their documentation as quickly as possible to the lender is key, because 9 times out of 10, there is always something else that a lender will need in order to issue closing documents to the Title Company.

2) The appraised value doesn’t come in to support the contract price – FHA loans require comps to be within a three-month time limit, which means it can be hard to find comps in some neighborhoods. The agent should always work with the appraiser if possible to submit comps or reports that show the property’s condition and the neighborhood that the banker has never seen.

3) Title can’t be transferred at closing – Title defects are another issue. Getting a preliminary title report as quickly as possible to surface those issues is extremely important for a buyer or seller, as you then have time to resolve them quickly. Short sales and REOs are particularly prone to issues, as sometimes the owner doesn’t surface them or the owner isn’t around. Perhaps there was work done on the property and if it went unpaid, the sellers might now have a lien on the property, or maybe there are unpaid HOA fees. Make sure the proceeds of the sale will cover any mortgage liens and unpaid fees.

4) A home inspection uncovers serious issues - For the seller, it pays to have their own inspections done and work performed prior to listing their home for sale, as many issues can be resolved before they become problems during the negotiation process with the buyers. However, sometimes sellers can’t afford this, but having a good agent to do a thorough walk-through with the owner helps. Asking the owner about the age of the roof, any repairs that have been made, and looking at the foundation is also helpful, and alerting buyers to possible high-ticket repairs and suggesting they factor those costs in will cut down on the amount of post contract negotiations.

Above all, allow more time for the transaction and closing to happen. A good buyer’s agent can get a realistic estimate of the clients’ closing date by creating a timeline of how long inspections and approvals will take to ensure making the closing day on time.

Posted by:  Rick Smith