Top Three Issues to Avoid During Escrow
The selling agent is the number one ally for the seller to (wait for it) sell their house. As such there are some critical obstacles to avoid in order to make sure the sale closes. Once the seller accepts the buyer’s offer the legal agreement is locked in for the duration of the escrow process. This phase is where the obstacles can rear their ugly heads. During this time the seller cannot entertain any other offers. They must wait for the buyer to move through the inspection process and the escrow process before the entire transaction is complete. This is where the delicate transaction can potentially run into problems and even fall apart.
Home Inspection Foibles
Buyers will order an inspection of the house. The results of the inspection report give the buyer the option to walk away from the deal, re-negotiate terms or make change requests. If it is a buyers’ market this puts the seller at a disadvantage and increases pressure on the seller to fulfill buyer requests. The seller is not obligated to fulfill the requests but if they are motivated to sell and don’t want to lose the deal then it is a good idea to fulfill all reasonable requests.
The best way to approach this is to be proactive and expect a certain amount of repair requests by building in a contingency budget into the list price of the home. This figure should be based on the age and condition of the home. The seller would be wise to order their own inspection report and base the contingency amount on repair recommendations on that initial preliminary report. This is a smart way to reduce sticker shock for the seller when the buyer presents their fix it list.
Depending on if your home is a first time home buyer property or a secondary home buyer property makes a huge difference on the types of requests to expect. For example, a first time home buyer is less likely to make repair requests unless there are major items found during inspection and if their agent coaches them to request the repair. Otherwise, the first time home buyer is so thrilled to actually own their first home they are not as concerned about items to repair.
A property that is more of a secondary home purchase such as one that has larger square footage or is a retirement property will most likely receive a larger list of repair requests because the type of buyer is more savvy and wants to avoid post purchase expenses as much as possible. This type of buyer has experience with the cost of maintaining a property. Especially if it is a retirement property with a buyer who has a fixed retirement income, expect a big push for repair items during the sale process.
Some common fix it items that a buyer may request include;
- roof repair or replacement
- plumbing issues
- electrical issues
- HVAC replacement
- window repair or replacement
Be sure to complete the agreed upon repair items before the final walk through inspection. This one is easy to avoid, embarrassing if left undone and can potentially ruin the sale if not completed. At the time of the final walk through, if the agreed upon repairs have not been completed there is potential for the entire sale of the house to fall out of contract. The buyer may have the right to walk away if the seller has not completed the agreed upon repair items. Even if it is a small item such as a foggy window that was agreed to be replaced and it wasn’t, the sale could be lost due to an incomplete contract. Avoid the repair scramble and make sure to get the agreed upon repairs complete before the final walk through inspection.
Appraisal Value Too Low
The house has been listed. A buyer is interested. An offer has been made. Everybody’s exited. Until a low appraisal amount is submitted during escrow. This type of event can end the deal. The buyers financing may be at risk if the appraisal amount is less then list price. The seller can then lower the sale price or hope that the buyer can either pay the difference or the financier approves the sale price instead of the appraised price. In addition, the buyer may be thrown off of the happy horse through all of this and walk away.
Avoid receiving a low appraisal in the middle of the deal. When you are listing your property get prepared to provide proof of the value you are listing the property at. Make a folder that includes comparable market listings that validate your list price. In addition include a list of home improvements that have been completed along with receipts. When you greet the appraiser be sure to conduct the walk through with them, explaining the improvements and repairs that have been done. This may help bring to light some value that the appraiser would not otherwise recognize and equate into the homes appraised value.
Title Not Ready
Most sellers do not even think about the little piece of paper that validates the ownership of their home called the “title” until it is time to pass it over to the buyer or more likely the buyer’s financier. Many times a home owner has never even seen their actual title because it is filed away somewhere with their mortgage lender. Because of this it is easy to forget that there could potentially be some clean up required before the title is passed from one party to the other.
Before you list your home start the process of making sure the title to the home is in order and ready for transfer. Especially if you have owned the home for many years there may be some unresolved issues attached to your title that you are not even aware of such as a long lost city tax or other fee that has been lurking waiting for the day that you move to sell the property to collect. It’s better to find out about these type of issues early or before you enter into a contract with a buyer to prevent annoying and unnecessary delays in completing the sale. If the closing date expires because you are moving through a title issue the buyer has the right to walk away from the sale.
A few glass and mirror items we fix;
Foggy Dual Pane Windows
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