The real estate process can be confusing and overwhelming. The stress of deadlines and delays can wreak havoc on your nerves. Documents of great importance and signatures are required for every step along the way. While we may wish for a straightforward process that involves finding a property you like, making an offer and getting it accepted quickly, the process is usually a bit more complicated than that.
Plenty of circumstances can arise that add a few more steps to the process. Whether you are planning to buy or sell your home, it is important that you understand that there are many unforeseen events that could delay your close of escrow date. Since there are so many parties involved in any successful real estate transaction, it should be understood that delays can happen.
Let’s explore the top 7 causes of a delayed escrow closing.
What is Escrow?
Designed to protect against fraud, nonpayment or some other form of financial malfeasance, an escrow account provides some peace of mind to all parties involved in a transaction. In essence, Escrow refers to a third-party service that is part of every home purchase. When a buyer and seller initially arrive at a purchase agreement, they select a neutral third party to act as the escrow agent. The escrow agent collects a deposit from the buyer that is equal to a small percentage of the sale price. This deposit is known as “earnest money”. In exchange, the seller takes the property listing off the market. Until the final exchange is completed, both the seller’s property and the buyer’s deposit are said to be in escrow.
How Long Does It Usually Take to Close Escrow?
Escrow is an account held by a third party while all the seller and buyer’s obligations are fulfilled. Many things affect how long it takes to close escrow, but this time can vary quite a bit. A “typical” escrow is 30-45 days but could take as long as 60. That gives the title company time to pull up the title report and search for any liens, easements, lawsuits or other clouds on title.
Some of the factors determining the length of the closing include a mortgage pre-approval, having the proper documents on hand, and the amount of time it takes to get the underwriting complete. And just like the length of time, the process can also vary by state. The steps, however, are generally the same for everyone.
Top 7 Causes of Delayed Escrow Closing
1. Unrealistic Closing Dates
Unrealistic agreement dates in the real estate offer most commonly result in a delayed closing. A buyer or seller who sets an unreasonable time for completion may end up with a lot of delays. The completion time depends on the type of funding available to the purchaser, the number of contingencies in the purchase offer, along with other variables.
Thoroughness is required for each step of the process in order to protect all parties involved. Rushing any step can result in missed issues, which will inevitably lead to delays. Be prudent in choosing your closing date and make sure you have everything together when it comes time for closing. All parties are busy and it is not as simple as meeting when the documents and inspection are all in order—scheduling can be difficult. Choose your date wisely.
2. The Lender Needs More Documents
When a buyer receives their home mortgage commitment, it is easy to assume that the funds are authorized, and the closing may proceed as planned. However, there are times when lenders request additional files at the last minute. These could be anything to approve the mortgage.
It is easy to forget to check up on the paperwork once your mortgage loan has been approved. The lender sometimes realizes they need more documents after you have been approved. Check back with your bank to make sure they have all the files they need. Many of these documents require verification and signatures from particular parties. Missing one of them could mean a chain of events is necessary in order to get the problem resolved. This can take time which may lead to a delay in the closing process.
3. Problems with Financing
The most common cause of delay in the closing process is buyer financing issues. Many buyers get preapproved, which means getting a written loan commitment from a bank saying it will provide you with a mortgage for a certain amount of money. If the buyer’s situation has changed since they received preapproval, things could change. If the loan application was inaccurate, interest rates go up sharply, your job situation changes, or the borrower’s credit score changes it could result in the closing process being drawn out to fix any problems.
Depending on the type of loan you are going to get whether you are obtaining conventional loans, FHA, or VA loans, it can impact the length of time for you to obtain the loan.
4. Appraisal Problems
The lender usually orders an appraisal after an offer is accepted. The value of the property as reflected by the appraisal can impact not only the taxes paid for the property over the following year, but also how much the house itself is worth. The value also matters to the bank because they are in the business of getting their money back. They do not want to hand out a large loan for a property that does not show much promise as security for the loan.
An appraisal that comes in far below the asking price for the property can become an issue. This issue can sometimes send the buyer and seller back into negotiations. And depending on what was found in the appraisal as well as the willingness of the parties to change the initial agreement, this process can take time.
Appraisals are something to keep up to date with to avoid delayed escrow closing. No matter if you are buying or selling, follow up with the appraisal and make sure it gets completed. Make sure the property is appraised for at least the price of the offer if not more.
Some of the more common appraisal problems that can arise include:
- The property is appraised at a lower value than the purchase price and the parties are not able to negotiate new terms.
- The appraisal reveals damages that must be repaired by the seller before closing.
- As the real estate agent, it is often helpful to learn whether any issues should be addressed before the appraisal.
5. Title Related Issues
Unresolved title problems can also result in closing delays. The majority of title issues can be solved, but often take a substantial time. These delays can also postpone closings or even cause the transaction to fall through altogether.
To get escrow closed on time, the owner will need to have a title for the house. The term title refers to the document that names the parties that own the property. There can be many issues when it comes to the title of the property. It’s so common that there is a name for a title with issues needing to be resolved – a tangled title.
There are many possible problems a property owner can have with a title. It is essential to learn about these problems as early as possible to avoid delays. Possible issues include:
- Boundary disputes
- An unknown will
- Forgeries
- Public records errors
- Liens
6. Unresolved Property Damage
After completing the property evaluation, the buyer may demand certain repairs or could ask the seller for concessions instead of the repair work. The buyer and seller will agree to either have the damage repaired or drop the price to remedy this issue. If you are a seller, be sure to make these repairs quickly. If you procrastinate, repairs could take longer than expected, and this will certainly delay the closing of escrow.
All buyers should also note that no property comes absolutely perfect. Be aware that the seller may fail to get the damage repaired or refuse to budge on the price. As a buyer, be sure to list any damages that need to be repaired.
7. Final Walk-Through Issues
The final walk through is crucial in real estate transactions, particularly for purchasers. The buyer will make one final pass through the home before closing day. The buyer is looking to make sure there are no unresolved issues with the property. Any previously agreed upon repairs will be verified. The buyer will also be checking for any new damage since the last time they walked the property.
Given that final walk-throughs typically occur the day of or before the closing, if there are unresolved issues, there will be escrow delays. These issues can include new damage, faulty repairs, or incomplete repairs. Any issues can lead to delays in escrow and closing.
There are several items that you and your buyer should be on the lookout for during the final walk through to prevent stalled closings:
- Faulty repairs
- Damaged heaters, air conditioning, or other major appliances
- Issues with plumbing or electrical systems
Avoiding Escrow Delay
Regardless of the reason, delayed escrow closing is a major headache. It is best to avoid these obstacles when possible. There are a few things you can do to make the process easier.
Do not leave town while in escrow. It may seem strange, but there could be a reason you need to be at the property. You would not want to be hours away if something came up that required your physical presence.
Keep in touch with your agent. Good communication between the buyer and seller is crucial to a smooth transaction. Check in with your agent once or twice a week. This will keep you up to date with any complications needing attention.
Finally, make sure you have all the documents needed. There are a lot of them to keep track of. Make sure they are all signed and turned over to whoever needs them. You would not want a missing signature to stop you from getting that deal closed.
What Happens at Citrus Heritage Escrow?
Your escrow officer follows instructions on your contract, coordinates deadlines, and gathers all necessary paperwork. For example, written requests for payoff information (called “demands”) are sent to the Seller’s mortgage company and any other lien holders.
During the escrow period, the title company coordinates with Citrus Heritage Escrow and begins researching and examining all historical records pertaining to the subject property. Barring any unusual circumstances, a commitment for title insurance is issued, indicating a clear title or listing any items which must be cleared prior to closing. The commitment is sent to you for review.
When choosing an escrow company there can be many important factors to evaluate. Fees, location, staff and even recommendations from friends and colleagues are all things to consider. With Citrus Heritage Escrow by your side, you can rest assured that when you receive your settlement check, you’ve gained the maximum benefit from your home sale or purchase.
Call us today with any questions or concerns. Our professional Escrow Agents will help you through this exciting yet confusing process. (951) 335-7200