John M. Lee: FAQ During the Escrow period

One of the most stressful times during the selling process is when your home is in escrow. This is when inspectors are walking through the property pointing out all the minute problems and not-so-minute problems with the house; when the buyers get buyer's remorse; and plans for moving get delayed and delayed. It's a stressful time and unless you are prepared, it can be quite an adventure.

From my 15 years of experience in selling real estate, here are the most common problems I have found during the period when a property is in escrow and the possible solutions to them. I hope that this is helpful.

Does the buyer have any way to back out of the transaction?
The contract generally has three major contingencies that must be satisfied in order for the transaction to close. They are approval of the disclosures, inspections, and loan(s).

If the buyer disapproves of any of these items in a timely manner as outlined in the contract, he or she can terminate the contract without any penalty. If the buyer has already removed these contingencies, the seller can claim damages and proceed against the buyer in a court of law for breach of contract.

What if the property's appraisal comes in too low?
This can present a major problem as an appraisal often determines the maximum amount a lender will lend on the property. If it is low, potential buyers might not be able to purchase the property and it could cause the property owner to be forced to lower the sales price to appraised value.

The good news is that the agent can sometimes sell the property for more than what the appraiser can reasonably justify. For instance, agents can generally do a few things including challenging the appraisal by providing the appraiser with more data or offering to carry back a second loan for the buyer.

How do we deal with inspection problems that are discovered during the escrow period?
Usually, we try to negotiate our differences. Keep in mind that if an inspector discovers a problem, that problem would have to be disclosed to the next potential buyer. So in many cases, it is better to negotiate with the buyer currently in escrow rather than starting all over again with new buyers.

What happens if the buyer does not remove a contingency in the time period specified in the contract?
The seller's agent would call the buyer's agent to determine what the problems are and try to resolve them in a timely manner. Also, usually if the buyer does not remove a contingency in a timely manner, the seller has a right to terminate the contract.

Whether to terminate or not depends on the sales activity being generated for the property.

Is there anything the seller and agent should be doing while in escrow?
No, not really. If you are working with a full service broker, he or she will handle every aspect of the escrow for you. The agent will alert you as to what is coming up on a frequent basis.

If you have any questions concerning the process, never hesitate to contact your agent.

What if the close of escrow is delayed?
The delay can be caused by several factors. Is it the fault of the buyers? Is it the fault of the lender? Is it a problem that the seller could have taken care of in time? Who is responsible for the delay?

The person causing the delay is liable and can be forced to compensate other parties for any monetary damages, such as the principal, interest, taxes and insurance charges incurred.

What if my tenant refuses to complete an Estoppel Certificate?
Usually that fact is noted in the property's records and the buyer is asked to accept as accurate the information as stated on the lease.

John M. Lee was recognized as one of Pacific Union's top producers, specializing in Richmond and Sunset district properties. If you have any questions regarding real estate, call him at (415) 447-6231 or e-mail isellsf@aol.com.