Buyers: How to Pick Yourself up if Your Bid to Buy Breaks Down
As I am going through this process right now, I know well the mixture of excitement and dread that is escrow. The end is in sight, victory is (almost) yours, and then suddenly, it’s not. Though this hasn't happened to me, and fingers crossed, it won't, I am also trying to prepare myself mentally in case it does. This blog is dedicated to buyers then, because we all go through escrow, and the best way to avoid fear of that process is to understand it-- and to know that even if an escrow falls through, it's not the end of the world. It's not even the end of our dream of homeownership.
Why Escrows Fail
One of the most likely reasons we might fall out of escrow is if our loan somehow hits a snag. We’ve detailed many times the fact that today’s lenders are much stricter than before, and as a result, even qualified people are being rejected.
Another reason is repairs: Especially for we first time buyers, anything remotely red flag that came back in the home inspection is likely to scare us, so we may ask the seller to fix every single thing. But the deal can fall apart if we’ve asked sellers for repairs they find unreasonable. Or, the seller may not be able to afford the repairs and will counter by asking you to amend your original agreement, and this freaks you out.
The Real Estate Library offers a list of the most common deal breakers in escrow, with detailed information on each. We’ve included the list here (visit the site for more information).
- Buyer has liens against him (known or unknown).
- Buyer cannot get financing.
- The buyer screws up financing after being approved.
- The buyer demands too many repairs.
- Buyers listen to others and not their agent.
- The seller has no equity.
- The seller’s job transfer didn’t go through.
- The other agent does not do their job.
- Seller discovers title problems.
- Buyer is unable to get fire insurance.
- Termite report is unacceptable to buyer or seller.
- The home inspection company is too picky, or the seller refuses tomake reasonable repairs.
- The appraisal takes too long or comes in too low.
- Buyer rejects the association documents.
- Escrow officer doesn’t follow through.
- Lender does the old “bait and switch”.
- Lender is not a mortgage banker.
- Paperwork is not handled in a timely manner.
Our best defense against a failed escrow is a very experienced Realtor® and a mortgage broker (as opposed to a single representative from one bank, since brokers can shop the loan to many potential lenders instead of just the one). But even with these allies on our side, the deal could still go south.
How to Move Forward if the Deal Crumbles
Whatever the reason we might fall out of escrow, the landing is a hard one, apt to leave bruises and scrapes. The experience can leave us wondering if we ever want to try again, or if we should resign ourselves to a lifetime of renting.
But as with all things worth fighting for, we can’t let one bad experience forever sour all other similar experiences. If we give up with our first set back, we’re really missing the chance to make something positive out of something negative. For even if escrow fails, we come out of the process an educated, real estate savvy buyer—because the amount we learn going through the process makes us near experts the next time we try.