Closing escrow: It ain’t over ’til it’s over

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Published Date 5/4/2023

For Sale. Sale Pending. Sold.

Those are the three signs that hang outside a house about to change hands. But what about those that go: For Sale, Sale Pending, and end up For Sale again?

According to statistics, up to 4% of homes that get accepted offers never close escrow. Why? And if you’re one of those buyers who just got an offer accepted, what can go sideways? According to Realtor.com’s Craig Donofrio, there is still a lot more to be done before you’re over the threshold of your new home.

In most cases, buyers go into an offer having been pre-approved for a loan if they are not paying cash for a home. Sellers rarely accept an offer without proof of loan pre-approval. Already a given? The next steps are the home appraisal and inspection. It’s your lender that requires the appraisal since they usually have the most skin in the game. An appraisal is an assessment by a professional appraiser verifying that the offer price is justified. The appraiser is usually provided by the lender. If the home’s appraised value is less than the purchase price, you will need to either make a greater down payment or negotiate with the seller to lower the price. A lender won’t give you a loan for more than the appraised value.

A home inspection isn’t required, but always recommended, even if you’re not getting a loan. “Go over the inspection report in detail with the inspector to make sure you’re familiar with any problems, their severity, and the estimated cost to fix them,” says Donofrio. “Additionally, you may also want to get your home checked for radon and pests, which are not covered in the general inspection. If the inspector finds problems, you may be able to get the seller to pay for necessary repairs or lower the price to adjust for the cost.”

Time to ready your funds. Double and triple-check that the funds you need for closing and in reserves are readily accessible. Now is the time to pull money from an investment account, and be sure to keep the paperwork for the transaction to show your lender you liquidated funds to get your down payment.

It’s also time to procure homeowners insurance, which you are expected to pay for upfront, before closing. “Depending on where you live, you might need extra insurance, like flood coverage,” adds Donofrio. “Shop around at several different insurance companies for the best rate. Your lender will need proof of insurance before approving your mortgage.”

Now it’s crunch time. You’ll be allowed to do a final walk-through of your new home 48 hours before closing, allowing you to ensure any items that should be there, as per your contract, remain. It also lets you check the condition of the home to make sure no extra damages have occurred since your offer was accepted and since the owners moved out. If you find anything different from what you agreed upon, you may postpone the closing to give the seller time to fix the problem. “It’s important that you catch every issue during the final walk-through. If you spot them after closing, they’re going to be your problem,” warns Donofrio.

After that it’s time for the oversized opera singer to give her final aria. This is the day when you sign the mortgage documents and officially gain ownership of the property. Your audience may consist of your Realtor, the seller, the seller’s Realtor, the closing officer, and perhaps the mortgage broker. The players that attend this event can vary. You, as well as your spouse, if any, are the most important people in the room — armed with your IDs as well as a cashier’s check to pay closing costs, a figure you will know in advance. If that figure looks different than what you were told, don’t be afraid to walk away.

In some states, lawyers are involved in the closing and keys are handed over at closing. But in most, there is a period of time between signing, the loan funding, and the recording of the sale. It’s when you hear the term “on record” that the house belongs to you.

A round of applause (and perhaps a stiff drink), please. You just got through the largest transaction you may ever experience in your lifetime.

Realtor, TBWS

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