Most common reasons deals fall through in escrow
Are you looking to purchase a new home or sell your current one? Going through the escrow process can be exciting and nerve-wracking at the same time. You’ve found the perfect home or buyer, you have a signed contract, and you’re ready to move forward. But what happens when the deal falls through? Unfortunately, it’s more common than you may think. In this article, we’ll explore the most common reasons why deals fall through in escrow and how you can avoid them.
Lack of Financing
One of the most common reasons that deals fall through in escrow is due to a lack of financing. This can happen on both sides of the transaction. For buyers, it’s crucial to have pre-approval from a lender before signing a contract. This ensures that you can secure the necessary funds to follow through with the purchase. Sellers also need to be aware of the buyer’s financial situation to avoid any surprises later on. If the buyer’s financing falls through, the deal will likely fall through as well.
How to Avoid:
If you’re a buyer, make sure you have secured financing before making an offer on a house. This will help you avoid any disappointment if you’re unable to secure a loan. For sellers, make sure to thoroughly vet potential buyers before accepting their offer. Ask for proof of pre-approval and look for any red flags that may indicate they won’t be able to secure financing.
Issues with the Home Inspection
A home inspection is a critical part of the escrow process. It allows buyers to uncover any hidden issues with the property and negotiate repairs or request a lower price. If the inspection reveals major issues with the house, this can be a deal-breaker for buyers. On the other hand, if sellers are unwilling to make necessary repairs or lower the price, the buyers may back out of the deal.
How to Avoid:
If you’re the buyer, make sure to carefully review the home inspection report and prioritize your concerns. Not every issue is a deal-breaker, and it’s essential to communicate with the seller to find a solution that works for both parties. For sellers, it’s essential to address any major issues with the house before putting it on the market. This will help avoid major surprises during the inspection process.
Low Appraisal
Another potential issue that may arise during the escrow process is a low appraisal. An appraisal is a professional opinion of the market value of a property, and it’s often required by lenders before approving a loan. If the appraisal comes in lower than the agreed-upon purchase price, it can cause problems for both buyers and sellers. Buyers may struggle to secure financing for the full amount, and sellers may refuse to lower the price.
How to Avoid:
As a buyer, try to get pre-approval for a loan that is higher than the agreed-upon purchase price to allow for any potential appraisal discrepancies. As a seller, it’s crucial to price your home realistically based on current market conditions. Overpricing your home can lead to a low appraisal and ultimately, a failed deal.
Title Issues
When purchasing a property, it’s essential to ensure that the title is clear of any liens or other issues that may impact the sale. If there are any title issues, it can delay or even cancel the sale. For example, if there is a lien on the property, the sale cannot proceed until it is paid off. This can cause significant delays and may ultimately lead to the deal falling through.
How to Avoid:
As a buyer, make sure to conduct a title search and purchase title insurance to protect yourself from any title issues. As a seller, try to resolve any title issues before putting your property on the market to avoid potential delays and keep the sale on track.
Unrealistic Expectations
The escrow process can be challenging for both buyers and sellers, and unrealistic expectations on either side can lead to a failed deal. For example, buyers may expect too many repairs or a lower price, while sellers may expect a quick and easy sale at their desired price. If these expectations are not met, it can lead to frustration and ultimately, a failed deal.
How to Avoid:
As a buyer or seller, it’s essential to do your research and have realistic expectations based on current market conditions. Communicate openly and honestly with the other party to ensure that everyone’s expectations align before moving forward with the escrow process.
In conclusion, there are many potential reasons why deals may fall through in escrow. However, being aware of these common issues and taking steps to mitigate them can help increase the chances of a successful transaction. Remember to do your due diligence, communicate openly, and address any potential problems early on to avoid any surprises and keep the deal on track.
