Real Estate Articles

How to avoid delays in escrow

Buying or selling a home can be a stressful experience, especially these days when there are more laws and documents involved in a real estate transaction. Many transactions stall, or even fail at escrow.

The California Escrow Association defines escrow as a service that provides parties to a transaction with a means of protection in the handling of funds and/or documents. Escrow enables the buyer and the seller to transact business with each other through a neutral party, the "escrow holder." In the escrow, all parties involved give their instructions to the escrow holder, whose duty it is to assure that no funds or property will change hands until all instructions have been carried to completion. This process assures the fair and equitable transfer of property. When instructions of all parties to the escrow have been carried out, the closing can take place. All outstanding funds are collected at this time and all costs must be paid. Title to the property will then be transferred. All specified documents are then recorded or filed at this time.

At a recent meeting at the Silicon Valley Association of REALTORS®, a panel of senior escrow officers and managers identified red flags that could delay a transaction and offered tips on how REALTORS® and their clients could avoid them. Comprising the panel were Lori Fredericks from Fidelity National Title; Linda Bentson, Old Republic Title; Alison Scharnow, First American Title; and Susie Wrede, Chicago Title.

Here are tips to avoid delays at escrow:

• Read all documents early. The escrow officers repeatedly emphasized that Realtors need to stress to clients that they should read all documents and do so early. If there are any documents they don't understand, they should ask questions.  "Sometimes tax liens from years ago pop up, and if they see this at the last minute, it can take time to clean up," explained Fredericks.
   
• Disclose everything. If there is a change in the price, this needs to be disclosed to the escrow company right away. Bentson added another common reason for delay is clients not disclosing all their financial accounts. "Lenders have to know where all the client's funds are, even foreign bank accounts. Be sure to disclose everything, or this will cause a delay in closing," said Bentson.
   
• Get the funds in early and accounted for. "Sometimes people will consolidate money into one account, thinking it will be easier that way," said Scharnow. She explained this action could actually cause confusion and prompt the lender to ask questions.
   
• Have proper identification in order. In cases where a client has a common last name, make sure the client has proper and more ID information, so the client is not mistaken for someone else with the same last name.
   
• Heads-up on fees. Especially in short sales, buyers should be aware that there could be unexpected fees that they may have to pay. 
   
• Double check insurance coverage. If you don't have enough insurance coverage, this will stall the process. Most lenders want 20 percent dwelling coverage.
   
• Communication is key to a smooth transaction. The escrow officers stressed good communication will prevent many delays to a transaction.  "Communication is very important with the lender, the escrow officer and all parties, so there are no worries about disclosure," Wrede noted.
   
• Sold doesn't mean it's closed. Just because seller and buyer have agreed on a price doesn't mean the transaction is a sure thing. Be aware that short sales can especially be tricky.
  
  "Short sale escrows may go through two or even three buyers – a buyer may lose his job and walk away from the transaction; or a buyer may get impatient with the length of time and walk away from the deal," said Bentson. "If all documents are in order, it will certainly speed up the process."

The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please email or call the SILVAR office at (408) 200-0100.

» Back to Real Estate Articles