Six Common Causes of Delayed Escrows and Closings
Considering that there are so many parties involved in commercial real estate transactions, it is understood that delays will happen, from time to time. In this blog, we’ll explain six common causes of delayed escrows and closings.
As a real estate agent, you should inform your clients of the most common reasons that could lead to escrow delays.
1 – Impractical Closing Dates
Unrealistic agreement dates, in the real estate offer, are one of the most common reasons for delayed real estate closings. A buyer or seller who sets an unreasonable time for completion may end up with a lot of delays.
It usually takes 45 to 60 days for a property closing to occur after the seller accepts the purchase offer. 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. Accordingly, it may be necessary to advise both the buyer and seller as to what constitutes a reasonable time to close.
2 – Appraisal Problems
When buying or selling real estate, don’t forget to inform your client successful closings are highly dependent upon the property appraiser’s evaluation. This is especially important when the purchaser is financing their purchase with a mortgage loan.
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.
3 – 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.
These types of delays can be mitigated by ensuring that your client is aware of any outstanding issues as early in the transaction as possible. While title complications can discourage buyers, many choose to wait when given a realistic time for completion.
4 – The Lender Requires Additional 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.
5 – 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. If both parties agree on repair jobs, it is critical that the seller makes good on the agreement before the closing date.
6 – Final Walk Through Issues
The final walk through is crucial in real estate transactions, particularly for purchasers. There are several items that you and your buyer should be on the lookout for during the final walk through to prevent stalled closings:
Damaged heaters, air conditioning, or other major appliances
Issues with plumbing or electrical systems
Given that final walkthroughs typically occur the day of or before the closing, if there are unresolved issues, there will be escrow delays.
In addition to the items above, sometimes the escrow process is delayed due to one of the professionals, i.e., lenders, closing attorneys, mortgage processors, etc. ‘dragging their feet.’
As you can see, many steps must be completed prior to finalizing an escrow. And all it takes is a single botched or omitted item to prevent the escrow settlement process. Fortunately, you can prevent escrow delays by heeding the insights that we’ve covered in this article.