4 Reasons Escrows Fail and How to Minimize Risk

4 Reasons Escrows Fail and How to Minimize Risk
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1. Buyer Can’t Get a Loan

It doesn’t happen as often because good agents know how to properly vet and ask the right questions. So to minimize this risk, probe the Buyer’s mortgage lender a little bit. Check how deep in the pre-qualification process they really are, which docs were provided to them, and if they foresee any issues?

2. Condition of the Home

Home Inspectors always find items wrong with the home. As a seller, consider having a pre-inspection done… This will give you as a seller an idea of what may need to be repaired and the buyers a clearer idea of the condition prior to agreeing to the offering terms. With this pre-inspection report disclosed to the Buyer, prior to accepting an offer, it will eliminate surprises and excuses to cancel escrow due to the condition of the home.

3. Low Appraisal

This can happen too. We see low appraisals more often than we’d like. If this happens make sure your agent is doing the following: Reviewing the report for mistakes, making sure all of the best comparables were used, and checking some of the values given in favor of or against your home. Make sure they are verifying accuracy. Removing the appraisal contingency up front, confirming sufficient funds from the buyer to make up the difference, and checking the accuracy of the appraisal report will all help eliminate the risk of the home falling out of escrow due to a low appraisal.

4. HOAs (Home Owner Associations)

Are the HOAs well funded? Is there a proposed or ongoing Special Assessment? Is the HOA involved in any lawsuits? Are there homeowners involved in any lawsuits with the HOA (pending litigation)? Are there more tenants than homeowners? Many of these questions can be asked upfront so buyers are properly prepared BEFORE finalizing the purchase agreement.


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