Real Estate Melt-Downs: Falling Out of Escrow is Never Fun

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Real Estate Melt-Downs: Falling Out of Escrow is Never Fun

Top Three Deal Killers – Why Orange County Escrows Fall Apart

If you’re keeping an eye on the Orange County Real Estate market, you’ve heard some deals are falling apart before they close.  Leaving hopeful home buyers and sellers stranded, stressed, and  massively frustrated.  While every failed escrow has a story all its own, there are a few common themes.  Here goes.

Failed Escrow Reason #1 – The Buyer no longer qualifies for the loan

Often in a failed escrow, the loan program’s qualifying parameters changed and when it came down to drawing docs and funding the loan, the buyer no longer met the criteria.  Other escrows fail when the buyer’s circumstances change, and he no longer qualifies.  Buying a car during escrow can kill a deal in today’s market.  Heck, buying a new refrigerator before you close can kill a deal.  A decrease in provable, document-able income can kill a deal.  A change in employment status can kill a deal.  Going on maternity leave can kill a deal.   Best thing to do while you are in escrow is “don’t change a thing.”

Failed Escrow Reason #2 – The Appraisal comes in lower than the contract price

If there is anything other than cash involved in the transaction, the buyer’s bank will require an appraisal.  In some cases today, the appraisal is coming in lower than what the home seller and home buyer have agreed to in their contract.  And the lender will not loan more than what the house appraises for.  With some financing, such as VA, the buyer is not allowed to make up the difference even if he has the money to do it.  The only thing that can save a deal like that is if the seller agrees to drop the price.  How often do you think that happens in this market?   In other cases, the seller may be willing to help make up some of the difference by dropping the price or giving the buyer a credit toward their closing costs.  But sometimes the gap between the contract price and the appraisal price is too great to bridge.  Dead deal.

Failed Escrow Reason #3 – The buyer and seller cannot agree on repairs

In the current market where Short Sales and REO homes are so common, it’s also common for the home inspection report to show that some pretty significant and costly repairs need to be made.  A slab leak in a vacant home can cause immediate and extensive damage.  Mold is another situation that, while it can be totally eradicated, can be costly to do thoroughly and properly.  Sometimes the bank will pay for these repairs and sometimes they won’t.  Many times the buyer walks away from a potential money pit rather than taking on the risk and expense.  Killing the deal.

Well, there you have it.  The top three reasons why houses are falling out of escrow in today’s Orange County Real Estate market.  If you’re the seller and your deal fell through and you are going Back on the Market (BOM as we say in the biz) make sure you tell the story accurately.  For all the buyers out there, be on guard during your escrow – protect your money situation at all costs.  Need help?  Give me a call.  949-678-3373.

I’m Leslie Eskildsen, keeping it real in Orange County Real Estate.

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