How to Make Sure You Don’t Fall out of Escrow—Buyer’s Version

By Realty Times Published Jun 29, 2021 11:05 am

According to The Truth About Mortgage, the “sale fail” rate of homes is rising. “More than four out of 100 sales look as if they’re going to close, and then fall out of escrow for one reason or another,” they said.

So how do you protect your purchase and make sure you get to the finish line? These four tips will help.

1. Prepare yourself for the inspection
Especially if you’re buying an older home, there are bound to be some surprises in the inspection report. The sale fail trend is particularly pronounced for older homes.

“Homes built from 1959 through 1969 had the highest sale fail rate at 5.2%, compared to homes built in 2016, with a dropout rate of only 2.6%, which is among the lowest proportion of failed sale bands,” said The Truth About Mortgage.

While you can’t be prepared for everything, you can go into the process with a realistic understanding that the condition of the home may reflect its age. Expecting everything to be in tip-top shape will probably leave you disappointed.

2. But…don’t be afraid to negotiate
That being said, the defects and recommended repairs that end up on inspection reports can be a lot to digest, and you have every right to expect a renegotiation for anything major. Your real estate agent should be able to provide guidance on how much seller cooperation is reasonable so it doesn’t put your home purchase at risk.

3. Don’t be cavalier with your credit
You’ve been pre-approved for a loan. Yay! Maybe you should celebrate by buying a new car or a house full of new furniture. No! Your preapproval is based on a number of factors, but credit score and debt-to-loan ratio are two of the big ones. Any change to those figures during escrow and you could find yourself with no financing.

“The underwriter—employed by your mortgage lender—will check your credit score, review your home appraisal, and ensure your financial portfolio has remained the same since you were pre-approved for the loan,” said Realtor.com. Since underwriting typically happens shortly before closing, you don’t want to do anything while you’re in contract that’s going to hurt your credit score. That includes buying a car, boat, or any other large purchase that has to be financed.”

You may think it’s rare that a financing issue hampers a closing, but, “In fact, 32% of settlement delays come from buyer financing issues which can crop up at the very last minute,” said Homelight.

4. Make sure you have all the required documents when you go to close
The last thing you want is to get to your closing and realize you forgot one of the documents you need. Don’t leave the house without:

• A driver’s license, passport, or some other government-issued photo ID
• Proof of your homeowner’s insurance
• A copy of your sales contract
• Any and all home inspection reports
• Any other paperwork the bank used for loan approval (double-check with your lender in plenty of time)
• A notarized document giving you power of attorney if your spouse won’t be present at closing
• A bank check or wire transfer for the full amount of your closing costs (check with your lender on the means of payment and final amount)