How To Prevent Escrow
Disasters
The 21 Most Common Reasons Escrows Fall Apart & What You Can Do To
Prevent It!
There's probably thousands of reasons why real estate transactions fail,
and describing them all would take a huge volume. In this small book I will
focus on only the most common reasons, drawn from 10 years of experience
and hundreds of transactions. I'm writing this so you can understand why
things go wrong, and be able to successfully escape the traps.
Table Of Contents:
Why are real estate
transactions so complicated?
How
your agent can make or break the transaction.
Your past transactions are
no guide to your next one.
Buyer
has liens against him (known or unknown).
Buyer cannot get
financing.
The
buyer screws up financing after being approved.
The buyer demands
too many repairs.
Buyers
listen to others and not their agent.
The seller has no
equity.
The
seller’s job transfer didn’t go through.
The other
agent does not do their job.
Seller discovers
title problems.
Buyer is
unable to get fire insurance.
Termite
report is unacceptable to buyer or seller.
The home
inspection company is too picky, or the seller refuses tomake reasonable
repairs.
The
appraisal takes too long or comes in too low.
Buyer
rejects the association documents.
Escrow officer
doesn’t follow through.
Lender does
the old “bait and switch”.
Lender is not
a mortgage banker.
Paperwork
is not handled in a timely manner.
Why are real estate transactions
so complicated?
Why is there no consistency from one experience to the next? Why are so many
people involved? These are good questions that address the root of many problems.
The main reason is that each transaction has a different group of people
involved. Imagine you're the coach of a baseball team, and for each game,
a whole new set of players shows up on the field! That's a good picture of
how the real estate industry works.
Behind it is the Real Estate Settlement Procedures Act (RESPA), a well-meaning
federal statute enacted in 1975. The intention was to separate all aspects
of a real estate transaction (agency, lending, title, etc.) so that the consumer
would have more choice, and there would be more competition in the marketplace
A good idea, but the result is that each player is now disconnected from
the others. Each player involved is a separate company, with its own way
of doing business. The agent is like the symphony conductor trying to make
music by bringing all these different instruments together.
But there's no standards. No one who can say "this is how we do business
here" and enforce that method across all the participants in the transaction.
Customers today are demanding more convenience, more of a "one-stop-shopping"
for the various services needed to complete a real estate transaction. But
for now, our hands are tied by RESPA.
Solution: The government is currently examining outdated RESPA laws. In the
meantime, if your agent has other vendors that he knows, trusts, and works
well with, you should seriously consider using those people. Many times I've
seen people pick an escrow company because they can save $50, and end up
regretting that decision. That amount is peanuts compared to the extra expense
and sheer aggravation of a delayed closing due to poor service.
The most
important decision you will make is which real estate agent
will represent you.
As I mentioned earlier, the agent is like the musical conductor, making sure
all the people involved play their parts. The real estate agent, not the
company he works for, is the person with whom you have to rely on to provide
you the information regarding how all the other parts really work together
to have a successful real estate transaction.
These are the major players that have to be coordinated by your agent:
* Seller's Agent
* Buyer's Agent
* Seller(s)
* Buyer(s)
* REO Banks/Foreclosures
* FHA, VA and HUD government departments
* Loan Broker
* Real Estate Appraiser
* Termite Inspector
* Home Inspector
* Roof Inspector
* Other Specialty Inspectors such as chimney/Engineering/Foundation/
Geological
* City, State and Federal Departments (i.e., zoning, permits and real estate
law issues)
* Title Officer
* Escrow Officer
* Insurance Agents
* Tax Accountant or CPA
* Family, friends, relatives, co-workers and people with whom you talk
Since it's not very hard to get a real estate license, we frequently see
people "jump in" when the market is good. They think all they have to do
is put a buyer and seller together and then the escrow company handles the
rest! That's like saying all the coach has to do is get the baseball players
onto the field and everything happens automatically from then on. That's
where the real work begins!
I've also seen more "professionals" such as mortgage brokers or insurance
agents telling consumers that they also have a real estate license so they
can "help" you buy or sell a house. Many agents "try" the business for awhile,
bungle a few transactions for people they know, then quit. This gives all
agents a bad reputation!
You should think seriously before hiring a new agent or someone who only
works at it part time, or whose interests are divided. How can they possibly
keep up with all the changes in the law? How can they stay on top of the
market? Will they spend the money to get the latest tools and technology
working in your favor? The bottom line is this... if they haven't been in
the business long, then they haven't done enough transactions to represent
you properly. Let the new guys make their mistakes on someone else... your
transaction is too important.
Solution: Hire an agent who is a Certified Residential Specialist (CRS).
This professional designation is awarded those agents who have at least 5
years experience, have completed over 75 transactions, and have taken almost
a solid month of extra education to serve you better. Only 3% of all agents
have this designation.
Your past transactions are no guide to
your next one.
Buyer(s) and/or Seller(s) should take the time to educate themselves regarding
the entire process. Usually, one or both of the principals in the transaction
don't understand certain parts of the process. Then, when the agent says
that something should be done a certain way, the principal (buyer/seller)
says, "that's not the way I heard it should be done" or "when I sold my house
in Virginia 20 years ago, I didn't have to let the buyer inspect the property
this way" or "I shouldn't have to do this or pay for this". The laws and
real estate customary practices ARE CHANGING CONSTANTLY.
In the last 10 to 12 years, real estate practices and laws have changed from
"let the buyer beware" to "buyer consumer protection". More and more, the
sellers are having to disclose more and become responsible for more. When
you hire a real estate agent, you must learn to trust that the agent knows
what he is doing and that the agent will act in your best interests. If you
don't understand the reasons why things are being done, you must either have
the agent explain the process to you or take the time to learn about it yourself.
Ideally, this should be done before you "dig in your heels" and say something
like, "I'm not doing this or that".
Solution: Read up on how to buy or sell real estate in this current market
by getting a copy of our "Preferred Buyer Handbook" or "Home Seller's Handbook."
These contain the latest information, strategies, and "street-smart" advice,
and were written by me personally. No "one size fits all" useless information
about basements and other Eastern stuff in these handbooks. Just straight
talk about how to make the easiest purchase or sale ever. Give me a call
at my office and I'll be happy to send you a copy.
Buyer has liens
against him (known or unknown).
These are "skeletons in the closet" that come out when someone decides to
buy a house. Did you know that when a father doesn't pay his child support,
a "Revenue and Recovery" lien is recorded against him? Then when that person
goes to buy real estate, out of the closet it jumps! The buyer may not have
known about it, or may not have known it would affect his purchase. Other
liens include IRS liens, judgments for non-payment of rent, and many more!
Solution: Every buyer should have a search run on himself for recorded liens.
This is done by filling out a "Statement of Information" or SI. Most agents
will ask you to do this at the last minute, almost as an afterthought, and
then the transaction blows up in everyone's faces. Why not do it up front
and avoid a lot of hassle and pain? If you're serious about buying a home,
ask your agent to run your SI as soon as you start looking. If you're a seller,
get that SI from your potential buyer as early as possible in the transaction.
Buyer cannot get
financing.
There are a multitude of sins that can show themselves when the buyer asks
a bank for HUNDREDS OF THOUSANDS of dollars. People take this lightly sometimes,
but let me ask you a question... what kind of documentation would YOU require
of someone before you gave them that kind of money?
A lender requires a credit report, proof of down payment, and proof of income
sufficient to pay the mortgage. All of this information needs to be verified
before a lender will loan the money.
Here's some of the things that can go wrong:
Black marks (derogatories) on the credit report, real or mistaken.
Relatives were going to give the down payment, and changed their minds.
Buyer's income can't be proven, is "under the table".
Buyer has money, but can't prove where it came from (not "seasoned").
Solution: There's no reason that these problems have to surface while in
escrow. A buyer should be "pre-approved" for his loan BEFORE shopping for
a home. This means that all that's left to do is an appraisal on the house
before the lender will loan the money. If you are a seller, you should insist
on "pre-approval" from a buyer before you take your home off the market for
any length of time.
Keep in mind that "prequalified" is not the same as "pre-approval".
"Prequalified" means that the buyer spent a few minutes on the phone with
a lender who asked a few questions. Based on the answers, the lender pronounces
the buyer "prequalified" and issues a certificate. Smart sellers are now
aware that such certificates are WORTHLESS because none of the information
has been verified.
There's just no reason for a buyer NOT to get pre-approved. In the best case,
this can be done in ONE HOUR! Show a W-2, a current pay stub, a bank account
where the down payment is, and run a credit report. Done! Some pre-approvals
take longer, but in any case it's better to wait a bit before finding a home
you love than to lose it because of financing problems in escrow.
The buyer
screws up financing after being approved.
Things can change during the escrow period, usually not for the better, which
is why we always shoot for the shortest escrow possible.
Some things can't be prevented, for example, the buyer loses his job. No
amount of professionalism on my part can do anything about that... the
transaction is dead.
On the other hand, sometimes mistakes are made out of ignorance, for example,
the buyer figures he has his home loan approved, so he runs out and buys
a new car! The lender never told him that would screw up his "debt to income"
ratio and now he can't get the loan.
My point here is that things can go wrong even with "pre-approved" buyers.
Education can help avoid mistakes made out of ignorance, but sometimes things
happen that are outside of anyone's control.
The buyer demands too many
repairs.
Most contracts have a seller warranty/maintenance clause. In most
cases, there are some things that the seller is obligated to fix, for example,
leaking roofs or broken windows.
But the buyer should realize that there is no perfect house, not even a new
house, or a house you build yourself. I've had new homes, and I've built
two homes myself, and I guarantee you this is true. Even people who buy million
dollar homes go in and change things.
How much the buyer can demand in repairs is going to be different for each
transaction. It depends on whether you're in a seller's or a buyer's market,
and the motivation and financial situation of each buyer and seller.
Buyers and sellers should keep an eye on the big picture and try not to focus
on the details. It's ridiculous to lose a quarter million dollar investment
over an oven knob, but it happens. Sometimes a small thing is "the straw
that broke the camel's back" and infuriates the seller to the point that
logic flies out the window and emotions take over. Why risk it?
Solution: The buyer needs to be sure he understands what the contract says,
what's part of the seller warranty clause, and what is not.
At the same time, the seller should be aware that at the very least he will
have to fix the items included in the seller warranty/maintenance clause.
Mentally, a seller should set aside several thousand dollars to repair problems
or defects discovered during escrow. A much better way to control these expenses
is for the seller to have all the property inspections completed BEFORE the
property is placed on the market. That takes the guesswork out of it.
Buyers listen to
others and not their agent.
Buyers will always have some "well meaning" friend, relative or
associate who will create doubt in the buyers' minds. Sometimes they will
"buckle" under the pressure and try to back out of a transaction. Such "advice"
is usually wrong, and does not take into account the current realities of
the marketplace.
Another source of misleading information is the newspaper. Real estate articles
in the newspaper are used as "filler" to make up for lack of advertising.
I've seen articles geared to a buyer's market appear when we're in the middle
of a seller's market! I think somebody at the paper reaches into a drawer
marked "real estate articles" and just prints any old one. Believing what
you read in the paper can be hazardous to your financial health!
The seller has no equity.
A transaction can fail if the seller cannot financially hold up their end
of the bargain. If equity is tight, and the agent didn't calculate the seller's
expenses accurately, the seller can be short on closing costs or money for
necessary repairs.
Solution: This situation could have been avoided if the seller had done his
homework before putting the house on the market, such as termite, physical,
hazards inspections, and a title search. Oddly enough, most agents don't
recommend these inspections ahead of time. They're thrilled to get the listing,
so why do anything to jeopardize it? So they do nothing and just hope everything
will work out later.
The seller's job
transfer didn't go through.
This is one of those "out of the blue" events that you can't guard against.
Most people have heard of transactions failing because the BUYER lost his
job, but the same kinds of tragedies can happen to the SELLER. Other examples
are death, bankruptcies or other lawsuits ("liz pendens") tying up the property
so that it cannot be sold.
The other agent does
not do their job.
The other real estate agent in the transaction might be a part-time agent,
out-of-town agent or a "full-time" agent who does very little business and
they ACT LIKE THEY KNOW WHAT THEY ARE DOING, WHEN THEY DON'T KNOW! Generally,
I'm forced to "stroke these agents egos" so that they don't mess up the
transaction and protect my clients rights at the same time. It is a difficult
balance to maintain because there are usually tough points in the transaction
where I have to try to figure out the best way to keep the transaction together
accounting for the fact that the agent is either ignorant or incompetent.
Usually, this problem is compounded by the fact that everyone is becoming
emotionally frustrated. The best advice I can give when this occurs is to
remember the primary objective is to move on with your life and get this
transaction closed. Therefore, keep calm and just understand that we can't
change an incompetent agent. Let's just be flexible and deal with the problems
as they come up.
If the other agent in the transaction is either lazy or disorganized, this
means that I will have to pick up the slack. I will have to force the process
to become as organized as possible without letting the other agent know that
I'm compensating for his or her lack of professionalism or laziness. No one
likes to be told that he is disorganized or lazy.
I may have to "dance around" these fragile egos so that the transaction can
keep moving forward with as few problems as possible. But don't worry, I've
done it many times before.
Seller discovers title
problems.
There are so many things that "pop up" during the preliminary title search
that create a "cloud" on the title. Many times things show up such as mechanics
liens, unrecorded easements, faulty trust documents, and judgments that can
prevent the property from being transferred. Even if you didn't have a problem
when you purchased the property, I've seen problems surface because of new
technology that was not available in previous years.
The only way to solve these issues is to open up escrow when the home is
put on the market and obtain a preliminary title report. The seller must
also fill out a "Statement of Information" (SI) to check for recorded judgments
against them. Then, do all the things necessary to be able to clear these
things up before a buyer makes an offer.
If a seller does obtain a preliminary title report and the buyer does not
use the title company that the seller used to obtain the preliminary title
report, the seller may be required to pay a $300 to $350 cancellation fee.
Most of the time the buyers will accommodate the seller by using the same
title company. Therefore, it makes sense to start doing all the preliminary
title work as soon as the house is put on the market.
Buyer is unable to get
fire insurance.
Thanks to the earthquakes and fires in California, insurance companies are
taking steps to limit their exposure in any one area. This means that when
they've sold a certain amount of fire policies in any geographical area,
they stop writing them. There's nothing wrong or risky about the area, just
that they don't want to have too many policies in one place.
Years ago, we would get the fire insurance a couple of days before closing
escrow, no big deal. Nowadays the buyer should start looking for insurance
as soon as he opens escrow. It may take a bit of shopping to find an acceptable
price for fire insurance.
Termite
report is unacceptable to buyer or seller.
A termite report is really a "Wood Destroying Pests & Organisms Report"
and includes wood damage by termites and a fungus called dry rot. In order
for the buyer to get a home loan, the house must be free of termites and
dry rot.
Here's what usually happens - the seller has found a buyer and has negotiated
an acceptable bottom line figure. Then he opens escrow and must do a termite
inspection. The bid comes in and he has a fit! It's way more than expected,
and his bottom line is out the window!
Then the seller decides to get a second opinion, because that bid can't possibly
be right. The second termite inspector finds things the first one missed,
and the bid is even higher! However, the buyer will see BOTH reports, because
they are on file with the Structural Pest Control Board in Sacramento. The
seller is worse off than before, and if there's no money left to do the repairs,
the whole transaction could unravel.
Solution: The seller should do a termite inspection as soon as he decides
to sell, and BEFORE an offer comes in. This avoids unwanted surprises after
negotiating a price, because all the expenses are known.
In fact, he should have the work done that's recommended in the inspection.
If it's done before the house sells, the seller can possibly save some money.
For example, I've seen the case where the house had a wood deck down the
whole side of the house that was completely rotten. The seller was able to
replace it with gravel and stepping stones for minimal cost, before putting
the house on the market. Had a buyer seen the wood deck, he would have bought
the house expecting the wood deck. When the termite report came in, the seller
would have had to replace the entire deck with new wood at considerable expense.
Another benefit of having the work done before selling is that the place
will look better. When I'm working with buyers, especially first time buyers,
I have to explain to them that the rotten wood they see will be replaced
before they move in. But how many other agents didn't explain this? How many
possible buyers didn't make an offer on the house because they thought "I
don't want to buy a house with rotten wood and do all that work"?
If you're a seller, you're going to have to do the termite repairs anyway,
so why not do it sooner rather than later? You'll avoid surprises, and probably
see more dollars in your pocket.
The home inspection
company is too picky,
or the seller refuses to make reasonable repairs. After escrow has been opened,
the buyer will hire someone to do a "physical inspection" to check out the
house. Think about that for a minute... it's like negotiating a price for
a used car, and THEN having it checked out by a auto mechanic. What do you
think will happen after it's checked out? You're right - it's back to the
negotiating table, because there are things wrong with the car that you didn't
know when you decided on a price. That's doing it backwards you say? But
this is normal in real estate transactions.
Anyway, the buyer hires someone to do a physical inspection. I've seen the
wrong inspector destroy a transaction by scaring the buyer out of their wits.
A first time buyer is making a big step and is already nervous, we don't
need an overzealous inspector terrifying him. Of course the inspector must
call it as he sees it, and I would never advocate anything less than full
disclosure of all facts. Never should anything be hidden from the buyer.
But no house is perfect, and the building codes 10 years ago were different
than today's. When you buy a house, it must be in good condition FOR IT'S
AGE. The smoke detectors, GFIs, spaces between railings, etc., must be to
code AT THE TIME THE HOUSE WAS BUILT. It is unreasonable to expect a 10 year
old home to be like a new one. If serious problems are discovered, these
are definitely a cause for concern. But I've seen transactions fail over
very minor repairs just because things were communicated poorly.
The home seller must also be prepared mentally for there to be some repairs,
and to not unreasonably refuse to fix anything. I know that the seller thinks
nothing is wrong with his "castle", but most people don't use everything
in their homes. Some people never use the dishwasher, and then we discover
that all the rubber is rotten from lack of use. Or many people with two ovens
only use one of them, and then find out the other doesn't work. This can
happen to you, so be prepared to do some repairs!
The best way for a seller not to be surprised by these repairs is to do the
inspection himself, before selling the house. That's being proactive rather
than reactive. When the report is done up front, the seller can benefit in
the following ways:
A. Price the property based on "actual knowledge" of the true condition of
the house. You are less likely to be surprised by the fact that the furnace
is cracked, the fireplace box needs to be re-built, or an electrical box
has been improperly wired.
B. Get repairs done more economically because you have the option to downgrade
the materials used from the most expensive grade to an acceptable standard
grade of materials. Also, you will have time to get competitive bids on the
work, and not be "under the gun" and have to hire the contractors who can
get the work done quickly even though they cost more.
C. Obtain cost estimates of the major items indicated in the report that
the seller will not be able to or is unwilling to repair. Buyers usually
have no idea what things cost, and will inflate the expenses in their minds.
Having a written estimate of the work goes a long way in bringing the numbers
back down to earth.
D. Strengthen your negotiating position by providing the reports to the buyer
before the buyer writes the offer. Therefore, a buyer is less likely to ask
you to repair any items if you indicate that you are pricing the property
based on estimated repairs that are indicated in the inspection reports.
E. From a legal standpoint, protect yourself when selling your home because
you are disclosing everything that you know about the property. With your
own real estate transfer disclosure plus the other inspection reports, you
are less likely to be found liable for hiding facts which could material
effect the desirability or value of the property from a buyer's standpoint.
So why would a seller NOT do the inspection before selling? Easy - because
they don't want to spend the money. But for a few hundred dollars, you can
save thousands and protect yourself and family at the same time.
The appraisal
takes too long or comes in too low.
This happens more often in a seller's market where prices are going up. If
you think about it, each house sells for more than the one before it... and
yet the ones before it are the houses that appraisers use to determine value.
They are looking at what happened in the past to decide today's value, and
that's the problem. Most appraisers know this, and "build in" appreciation
when deciding on a current value. But how much appreciation is a judgment
call, and sometimes an appraiser will estimate on the low side.
When the appraisal comes in low, the seller can reduce the price, the buyer
can put a larger down payment, or both parties can split the difference.
If there's plenty of time, perhaps the buyer can try a different lender and
get a different appraiser.
Another problem surfaces in a hot market when appraisers are swamped with
business. The problem is that it takes forever to get an appraisal! What
used to take a day now takes a week. So where it used to take 3 days to get
an appraiser out to the property, now it takes three weeks. This could be
a serious problem if escrow needs to close at a certain time, for example
to keep a locked-in interest rate on a loan. The only solution here is to
order the appraisal IMMEDIATELY after opening escrow. I've seen lenders wait
two weeks before ordering the appraisal because "the buyer didn't send in
the check." Make sure this gets taken care of right away or expensive delays
could result.
Buyer rejects the
association documents.
Many properties are part of a homeowner's association, or maybe more than
one association. The buyer of the property will need to be given a copy of
the association documents and approve them. The documents include:
Covenants, Codes, & Restrictions ("CC&Rs") - the rules and regulations
homeowners must abide by
Minutes - what was talked about at the most recent association meetings
Financials - the association budget, money set aside for future repairs
("reserves"), etc.
Since the buyer can kill the transaction by disapproving the association
documents, it makes sense to get them into his hands as soon as possible,
doesn't it? It's the seller's job to give the MOST RECENT documents to the
buyer. This means that the seller cannot simply dig them out of the attic
and give the buyer the documents from when he bought the house. He has to
buy a new set from the association.
Now the association, depending on its size, may or may not get to this as
quickly as we would like. We've seen associations take 3 or 4 weeks to get
the documents out. That means that at the last minute, the escrow can fail
if the buyer is spooked by the association documents.
Solution: sellers should get the latest documents from their association
BEFORE opening escrow. The documents can be handed to the buyer as soon a
purchase agreement is reached, eliminating that contingency. Why don't sellers
do this? Because it costs money to pay for the documents. If the seller didn't
get the documents ahead of time, the buyer should make sure they're ordered
immediately after opening escrow.
Escrow officer doesn't
follow through.
We've already talked about some of the documents that are critical to a
transaction, such as the SIs, the CC&Rs, title report, termite report,
association documents, etc. The escrow officer is responsible for making
sure these are taken care of, but sometimes it doesn't get done in a timely
manner. For example, the SI might be sent in for a judgment check, but the
escrow officer "assumes" that since nobody said anything, it must be OK.
These kinds of assumptions can really come back to haunt you.
Everything must be followed up on to see that it gets done, and every disclosure,
approval, report, and document must be in our file before the escrow can
close. So the bottom line is that your agent is the one who is ultimately
responsible for everything, and if the escrow officer is slow, incompetent,
or too busy, your agent must pick up the slack so that your interests are
protected.
We've just had a situation where escrow said the title company didn't do
what they were supposed to, and the title company blamed the escrow company.
No one wants to accept the blame when something goes wrong because people
want to save face and not be held liable for their mistakes. So we'll never
really know what happened there. But we have learned over the years not to
depend on anyone, but to check everything ourselves.
The potential for mistakes is greater when escrow companies are very busy,
such as in a hot market. There's no time to handle everything, and no time
to train people to help. What happens then is that "crises" are handled first,
and your file ends up on the bottom. After all, you're not closing for a
couple of weeks yet, right? But since you've read this far, you understand
that handling things ahead of time is exactly how you prevent a crisis later.
So by putting things off to the last minute, you're almost GUARANTEED to
have a crisis of your very own. It's your agent's job to stay on top of all
the players in the transaction and to make sure your important transaction
doesn't end up at the bottom of someone's pile.
Lender does the old "bait
and switch".
There are many ways things can go wrong with the loan. Interest rates can
go up, the mortgage insurance premium (PMI) can be more than the buyer expected,
or the loan program can disappear. The fact is, unless the buyer "locks"
his loan rate, anything can happen. Why don't buyers lock in their rates?
Again, because it usually costs money to do it. And there are some unscrupulous
lenders out there who will tell you one thing when you first meet and then
change it at the last minute, knowing that you're too far along to change
lenders.
By the way, since interest rates will change from the time you talk to a
lender until the time you actually close, how in the world can you pick a
lender based on rates? You should choose a lender based on whether you trust
him and believe he has your best interests in mind.
Lender is not a mortgage banker.
What's the difference between a mortgage banker and a mortgage broker?
A mortgage broker takes your application, and then brings it to the wholesale
department of any lender he chooses. In this way, you don't have to make
applications at several lending institutions. You just apply once, and then
your lender takes it to whatever bank has the best deal at the time.
A mortgage banker lends their own money. You fill out the application, the
loan officer walks down the hall to the underwriter, and you can actually
have loan approval in about an hour!
The advantage of using a mortgage banker is control. Everything is done in
house, so the loan officer can "pull strings" or do whatever it takes to
get your loan through. If there's a problem with your loan, he walks down
the hall and talks to the underwriter and straightens it out. In contrast,
the mortgage broker who takes your loan to a bank is out of control. The
bank puts those loans at the bottom of the pile. The loan officer can do
nothing but wait. I've seen this happen more times that I care to remember.
It's no fun at all waiting for weeks past when you thought you were going
to move into your new home because the bank hasn't gotten to your file yet!
All you can do is wait while the bank takes care of all their "in-house"
loans first.
When the market is busy, like it is now, this can be a critical issue. Having
your closing delayed can cost you much more than you thought you were going
to save. And what about the "bait and switch"? If the bank pulls this trick,
the loan officer is powerless to do anything - he's not part of that
organization, and can't go to the boss and plead your case. You're out of
control, and that's a terrible situation to be in.
Paperwork is not
handled in a timely manner.
There can be delays and hang-ups by any of the parties in the transaction.
Usually we're dealing with a low-paid person who can care less that your
transaction is critical. For example, the termite inspector does his inspection
quickly, but then drops it off on this clerical person's desk to type it
up and mail it out. And there it sits. Then she goes on vacation, and we're
still waiting.
Much of our job is following up with these people to make sure things get
done when they're supposed to. We can't assume anything, because we're talking
about hundreds of thousands of your dollars here. So we keep calling until
we get what we need. Sometimes people have even gotten angry with us for
insisting that they do their jobs. "I'll get around to it" isn't good enough.
That's how things get screwed up.
Even the buyer and seller can be slow on returning their paperwork. They'll
get a package from escrow and drop it on the dining room table. "I'll get
around to it" they think to themselves. If it wasn't important, then escrow
wouldn't have sent it to you! Many times critical issues and deadlines are
passed because the paperwork is sitting on the table.
Contrary to popular opinion, escrow is not opened when two parties come to
an agreement. Escrow is officially opened when escrow has signed instructions
from both parties. The seller needs to know that the buyer's deposit money
is not held in escrow until there is an escrow to hold it in! So they go
for weeks into a transaction without sending in the escrow instructions,
not knowing that there isn't a dime of the buyer's deposit holding the
transaction together. The buyer can walk away at any time, for no reason
at all, and escrow can't do a thing about it.
In a real estate transaction, "time is of the essence". This means that all
paperwork, reports, and disclosures need to be done as soon as possible.
Nothing good can happen by waiting. As time goes on, people become more and
more committed to the move. The pain is much less if the transaction falls
apart sooner rather than later. So we put a lot of effort into getting things
done sooner.
I have written this report for two reasons:
First, I would like to be a consumer advocate for you, your family, your
friends and associates and empower you to understand the types of strategies
you and they can use in your next real estate transaction. If you know of
someone who is either thinking about selling or buying a home, please let
me know and I'll be happy to send a copy of this report to them.
Second, I hope that you see the value of the knowledge and services that
we provide. My primary goals for you right now are to let you know that you
must PROTECT YOURSELF, YOUR FAMILY, YOUR FRIENDS and YOUR ASSOCIATES. The
information provided in this report is just the start of doing that for you.
Your situation is unique, and requires customized advice and representation
which I can't give you on a website. Real Estate home selling and purchasing
is most likely the biggest financial transaction that you'll make in your
life, so doesn't it make sense to get the best representation?
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