How to Close Escrow

Avoid Common Problems Closing Escrow

There’s probably thousands of reasons why real estate transactions fail in the escrow process, and describing them all would take a huge volume. In this small book I will focus on only the most common reasons, drawn from 22 years of experience and hundreds of transactions. I’m writing this so you can understand what is escrow, why things go wrong, and how to close escrow by avoiding common escrow problems.

Table Of Contents:

Why are real estate transactions so complicated? Why are real estate transactions so complicated?
How your agent can make or break the transaction. How your agent can make or break the transaction.
Your past transactions are no guide to your next one. Your past transactions are no guide to your next one.
Buyer has liens against him (known or unknown). Buyer has liens against him (known or unknown).
Buyer cannot get financing. Buyer cannot get financing.
The buyer screws up financing after being approved.  The buyer screws up financing after being approved.
The buyer demands too many repairs. The buyer demands too many repairs.
Buyers listen to others and not their agent. Buyers listen to others and not their agent.
The seller has no equity. The seller has no equity.
The seller’s job transfer didn’t go through. The seller’s job transfer didn’t go through.
The other agent does not do their job. The other agent does not do their job.
Seller discovers title problems. Seller discovers title problems.
Buyer is unable to get fire insurance. Buyer is unable to get fire insurance.
Termite report is unacceptable to buyer or seller. Termite report is unacceptable to buyer or seller.
The home inspection company is too picky, or the seller refuses tomake reasonable repairs. The home inspection company is too picky, or the seller refuses tomake reasonable repairs.
The appraisal takes too long or comes in too low. The appraisal takes too long or comes in too low.
Buyer rejects the association documents. Buyer rejects the association documents.
Escrow officer doesn’t follow through. Escrow officer doesn’t follow through.
Lender does the old “bait and switch”. Lender does the old “bait and switch”.
Lender is not a mortgage banker. Lender is not a mortgage banker.
Paperwork is not handled in a timely manner. Paperwork is not handled in a timely manner.

  Why are real estate transactions so complicated?

Why is there no consistency from one experience to the next? Why are so many people involved? These are good questions that address the root of many problems.

The main reason is that each transaction has a different group of people involved. Imagine you’re the coach of a baseball team, and for each game, a whole new set of players shows up on the field! That’s a good picture of how the real estate industry works.

Behind it is the Real Estate Settlement Procedures Act (RESPA), a well-meaning federal statute enacted in 1975. The intention was to separate all aspects of a real estate transaction (agency, lending, title, etc.) so that the consumer would have more choice, and there would be more competition in the marketplace.

A good idea, but the result is that each player is now disconnected from the others. Each player involved is a separate company, with its own way of doing business. The agent is like the symphony conductor trying to make music by bringing all these different instruments together.

But there’s no standards. No one who can say “this is how we do business here” and enforce that method across all the participants in the transaction. Customers today are demanding more convenience, more of a “one-stop-shopping” for the various services needed to complete a real estate transaction. But for now, our hands are tied by RESPA.

Solution: The government is currently examining outdated RESPA laws. In the meantime, if your agent has other vendors that he knows, trusts, and works well with, you should seriously consider using those people. Many times I’ve seen people pick an escrow company because they can save $50, and end up regretting that decision. That amount is peanuts compared to the extra expense and sheer aggravation of a delayed closing due to poor service.

  The most important decision you will make is which real estate agent will represent you.

As I mentioned earlier, the agent is like the musical conductor, making sure all the people involved play their parts. The real estate agent, not the company he works for, is the person with whom you have to rely on to provide you the information regarding how all the other parts really work together to have a successful real estate transaction.

These are the major players that have to be coordinated by your agent:

  • Seller’s Agent
  • Buyer’s Agent
  • Seller(s)
  • Buyer(s)
  • REO Banks/Foreclosures
  • FHA, VA and HUD government departments
  • Loan Broker
  • Real Estate Appraiser
  • Termite Inspector
  • Home Inspector
  • Roof Inspector
  • Other Specialty Inspectors such as chimney/Engineering/Foundation/ Geological
  • City, State and Federal Departments (i.e., zoning, permits and real estate law issues)
  • Title Officer
  • Escrow Officer
  • Insurance Agents
  • Tax Accountant or CPA
  • Family, friends, relatives, co-workers and people with whom you talk

Since it’s not very hard to get a real estate license, we frequently see people “jump in” when the market is good. They think all they have to do is put a buyer and seller together and then the escrow company handles the rest! That’s like saying all the coach has to do is get the baseball players onto the field and everything happens automatically from then on. That’s where the real work begins!

I’ve also seen more “professionals” such as mortgage brokers or insurance agents telling consumers that they also have a real estate license so they can “help” you buy or sell a house. Many agents “try” the business for awhile, bungle a few transactions for people they know, then quit. This gives all agents a bad reputation!

You should think seriously before hiring a new agent or someone who only works at it part time, or whose interests are divided. How can they possibly keep up with all the changes in the law? How can they stay on top of the market? Will they spend the money to get the latest tools and technology working in your favor? The bottom line is this… if they haven’t been in the business long, then they haven’t done enough transactions to represent you properly. Let the new guys make their mistakes on someone else… your transaction is too important.

Solution: Hire an agent who is a Certified Residential Specialist (CRS). This professional designation is awarded those agents who have at least 5 years experience, have completed over 75 transactions, and have taken almost a solid month of extra education to serve you better. Only 3% of all agents have this designation.

  Your past transactions are no guide to your next one.

Buyer(s) and/or Seller(s) should take the time to educate themselves regarding the entire process. Usually, one or both of the principals in the transaction don’t understand certain parts of the process. Then, when the agent says that something should be done a certain way, the principal (buyer/seller) says, “that’s not the way I heard it should be done” or “when I sold my house in Virginia 20 years ago, I didn’t have to let the buyer inspect the property this way” or “I shouldn’t have to do this or pay for this”. The laws and real estate customary practices ARE CHANGING CONSTANTLY.

In the last 10 to 12 years, real estate practices and laws have changed from “let the buyer beware” to “buyer consumer protection”. More and more, the sellers are having to disclose more and become responsible for more. When you hire a real estate agent, you must learn to trust that the agent knows what he is doing and that the agent will act in your best interests. If you don’t understand the reasons why things are being done, you must either have the agent explain the process to you or take the time to learn about it yourself. Ideally, this should be done before you “dig in your heels” and say something like, “I’m not doing this or that”.

Solution: Read up on how to buy or sell real estate in this current market by getting a copy of our “Preferred Buyer Handbook” or “Home Seller’s Handbook.” These contain the latest information, strategies, and “street-smart” advice, and were written by me personally. No “one size fits all” useless information about basements and other Eastern stuff in these handbooks. Just straight talk about how to make the easiest purchase or sale ever. Give me a call at my office and I’ll be happy to send you a copy.

  Buyer has liens against him (known or unknown).

These are “skeletons in the closet” that come out when someone decides to buy a house. Did you know that when a father doesn’t pay his child support, a “Revenue and Recovery” lien is recorded against him? Then when that person goes to buy real estate, out of the closet it jumps! The buyer may not have known about it, or may not have known it would affect his purchase. Other liens include IRS liens, judgments for non-payment of rent, and many more!

Solution: Every buyer should have a search run on himself for recorded liens. This is done by filling out a “Statement of Information” or SI. Most agents will ask you to do this at the last minute, almost as an afterthought, and then the transaction blows up in everyone’s faces. Why not do it up front and avoid a lot of hassle and pain? If you’re serious about buying a home, ask your agent to run your SI as soon as you start looking. If you’re a seller, get that SI from your potential buyer as early as possible in the transaction.

  Buyer cannot get financing.

There are a multitude of sins that can show themselves when the buyer asks a bank for HUNDREDS OF THOUSANDS of dollars. People take this lightly sometimes, but let me ask you a question… what kind of documentation would YOU require of someone before you gave them that kind of money?

A lender requires a credit report, proof of down payment, and proof of income sufficient to pay the mortgage. All of this information needs to be verified before a lender will loan the money.

Here’s some of the things that can go wrong:

  • Black marks (derogatories) on the credit report, real or mistaken.
  • Relatives were going to give the down payment, and changed their minds.
  • Buyer’s income can’t be proven, is “under the table”.
  • Buyer has money, but can’t prove where it came from (not “seasoned”).

Solution: There’s no reason that these problems have to surface while in escrow. A buyer should be “pre-approved” for his loan BEFORE shopping for a home. This means that all that’s left to do is an appraisal on the house before the lender will loan the money. If you are a seller, you should insist on “pre-approval” from a buyer before you take your home off the market for any length of time.

Keep in mind that “prequalified” is not the same as “pre-approval”. “Prequalified” means that the buyer spent a few minutes on the phone with a lender who asked a few questions. Based on the answers, the lender pronounces the buyer “prequalified” and issues a certificate. Smart sellers are now aware that such certificates are WORTHLESS because none of the information has been verified.

There’s just no reason for a buyer NOT to get pre-approved. In the best case, this can be done in ONE HOUR! Show a W-2, a current pay stub, a bank account where the down payment is, and run a credit report. Done! Some pre-approvals take longer, but in any case it’s better to wait a bit before finding a home you love than to lose it because of financing problems in escrow.

  The buyer screws up financing after being approved.

Things can change during the escrow period, usually not for the better, which is why we always shoot for the shortest escrow possible.

Some things can’t be prevented, for example, the buyer loses his job. No amount of professionalism on my part can do anything about that… the transaction is dead.

On the other hand, sometimes mistakes are made out of ignorance, for example, the buyer figures he has his home loan approved, so he runs out and buys a new car! The lender never told him that would screw up his “debt to income” ratio and now he can’t get the loan.

My point here is that things can go wrong even with “pre-approved” buyers. Education can help avoid mistakes made out of ignorance, but sometimes things happen that are outside of anyone’s control.

  The buyer demands too many repairs.

Most contracts have a seller warranty/maintenance clause. In most cases, there are some things that the seller is obligated to fix, for example, leaking roofs or broken windows.

But the buyer should realize that there is no perfect house, not even a new house, or a house you build yourself. I’ve had new homes, and I’ve built two homes myself, and I guarantee you this is true. Even people who buy million dollar homes go in and change things.

How much the buyer can demand in repairs is going to be different for each transaction. It depends on whether you’re in a seller’s or a buyer’s market, and the motivation and financial situation of each buyer and seller.

Buyers and sellers should keep an eye on the big picture and try not to focus on the details. It’s ridiculous to lose a half million dollar investment over an oven knob, but it happens. Sometimes a small thing is “the straw that broke the camel’s back” and infuriates the seller to the point that logic flies out the window and emotions take over. Why risk it?

Solution: The buyer needs to be sure he understands what the contract says, what’s part of the seller warranty clause, and what is not.

At the same time, the seller should be aware that at the very least he will have to fix the items included in the seller warranty/maintenance clause. Mentally, a seller should set aside several thousand dollars to repair problems or defects discovered during escrow. A much better way to control these expenses is for the seller to have all the property inspections completed BEFORE the property is placed on the market. That takes the guesswork out of it.

Buyers listen to others and not their agent.

Buyers will always have some “well meaning” friend, relative or associate who will create doubt in the buyers’ minds. Sometimes they will “buckle” under the pressure and try to back out of a transaction. Such “advice” is usually wrong, and does not take into account the current realities of the marketplace.

Another source of misleading information is the newspaper. Real estate articles in the newspaper are used as “filler” to make up for lack of advertising. I’ve seen articles geared to a buyer’s market appear when we’re in the middle of a seller’s market! I think somebody at the paper reaches into a drawer marked “real estate articles” and just prints any old one. Believing what you read in the paper can be hazardous to your financial health!

  The seller has no equity.

A transaction can fail if the seller cannot financially hold up their end of the bargain. If equity is tight, and the agent didn’t calculate the seller’s expenses accurately, the seller can be short on closing costs or money for necessary repairs.

Solution: This situation could have been avoided if the seller had done his homework before putting the house on the market, such as termite, physical, hazards inspections, and a title search. Oddly enough, most agents don’t recommend these inspections ahead of time. They’re thrilled to get the listing, so why do anything to jeopardize it? So they do nothing and just hope everything will work out later.

  The seller’s job transfer didn’t go through.

This is one of those “out of the blue” events that you can’t guard against. Most people have heard of transactions failing because the BUYER lost his job, but the same kinds of tragedies can happen to the SELLER. Other examples are death, bankruptcies or other lawsuits (“liz pendens”) tying up the property so that it cannot be sold.

The other agent does not do their job.

The other real estate agent in the transaction might be a part-time agent, out-of-town agent or a “full-time” agent who does very little business and they ACT LIKE THEY KNOW WHAT THEY ARE DOING, WHEN THEY DON’T KNOW! Generally, I’m forced to “stroke these agents egos” so that they don’t mess up the transaction and protect my clients rights at the same time. It is a difficult balance to maintain because there are usually tough points in the transaction where I have to try to figure out the best way to keep the transaction together accounting for the fact that the agent is either ignorant or incompetent.

Usually, this problem is compounded by the fact that everyone is becoming emotionally frustrated. The best advice I can give when this occurs is to remember the primary objective is to move on with your life and get this transaction closed. Therefore, keep calm and just understand that we can’t change an incompetent agent. Let’s just be flexible and deal with the problems as they come up.

If the other agent in the transaction is either lazy or disorganized, this means that I will have to pick up the slack. I will have to force the process to become as organized as possible without letting the other agent know that I’m compensating for his or her lack of professionalism or laziness. No one likes to be told that he is disorganized or lazy.

I may have to “dance around” these fragile egos so that the transaction can keep moving forward with as few problems as possible. But don’t worry, I’ve done it many times before.

  Seller discovers title problems.

There are so many things that “pop up” during the preliminary title search that create a “cloud” on the title. Many times things show up such as mechanics liens, unrecorded easements, faulty trust documents, and judgments that can prevent the property from being transferred. Even if you didn’t have a problem when you purchased the property, I’ve seen problems surface because of new technology that was not available in previous years.

The only way to solve these issues is to open up escrow when the home is put on the market and obtain a preliminary title report. The seller must also fill out a “Statement of Information” (SI) to check for recorded judgments against them. Then, do all the things necessary to be able to clear these things up before a buyer makes an offer.

If a seller does obtain a preliminary title report and the buyer does not use the title company that the seller used to obtain the preliminary title report, the seller may be required to pay a $300 to $350 cancellation fee. Most of the time the buyers will accommodate the seller by using the same title company. Therefore, it makes sense to start doing all the preliminary title work as soon as the house is put on the market.

  Buyer is unable to get fire insurance.

Thanks to the earthquakes and fires in California, insurance companies are taking steps to limit their exposure in any one area. This means that when they’ve sold a certain amount of fire policies in any geographical area, they stop writing them. There’s nothing wrong or risky about the area, just that they don’t want to have too many policies in one place.

Years ago, we would get the fire insurance a couple of days before closing escrow, no big deal. Nowadays the buyer should start looking for insurance as soon as he opens escrow. It may take a bit of shopping to find an acceptable price for fire insurance.

  Termite report is unacceptable to buyer or seller.

A termite report is really a “Wood Destroying Pests & Organisms Report” and includes wood damage by termites and a fungus called dry rot. In order for the buyer to get a home loan, the house must be free of termites and dry rot.

Here’s what usually happens – the seller has found a buyer and has negotiated an acceptable bottom line figure. Then he opens escrow and must do a termite inspection. The bid comes in and he has a fit! It’s way more than expected, and his bottom line is out the window!

Then the seller decides to get a second opinion, because that bid can’t possibly be right. The second termite inspector finds things the first one missed, and the bid is even higher! However, the buyer will see BOTH reports, because they are on file with the Structural Pest Control Board in Sacramento. The seller is worse off than before, and if there’s no money left to do the repairs, the whole transaction could unravel.

Solution: The seller should do a termite inspection as soon as he decides to sell, and BEFORE an offer comes in. This avoids unwanted surprises after negotiating a price, because all the expenses are known.

In fact, he should have the work done that’s recommended in the inspection. If it’s done before the house sells, the seller can possibly save some money. For example, I’ve seen the case where the house had a wood deck down the whole side of the house that was completely rotten. The seller was able to replace it with gravel and stepping stones for minimal cost, before putting the house on the market. Had a buyer seen the wood deck, he would have bought the house expecting the wood deck. When the termite report came in, the seller would have had to replace the entire deck with new wood at considerable expense.

Another benefit of having the work done before selling is that the place will look better. When I’m working with buyers, especially first time buyers, I have to explain to them that the rotten wood they see will be replaced before they move in. But how many other agents didn’t explain this? How many possible buyers didn’t make an offer on the house because they thought “I don’t want to buy a house with rotten wood and do all that work”?

If you’re a seller, you’re going to have to do the termite repairs anyway, so why not do it sooner rather than later? You’ll avoid surprises, and probably see more dollars in your pocket.

   The home inspection company is too picky.

Or the seller refuses to make reasonable repairs. After escrow has been opened, the buyer will hire someone to do a “physical inspection” to check out the house. Think about that for a minute… it’s like negotiating a price for a used car, and THEN having it checked out by an auto mechanic. What do you think will happen after it’s checked out? You’re right – it’s back to the negotiating table, because there are things wrong with the car that you didn’t know when you decided on a price. That’s doing it backwards you say? But this is normal in real estate transactions.

Anyway, the buyer hires someone to do a physical inspection. I’ve seen the wrong inspector destroy a transaction by scaring the buyer out of their wits. A first time buyer is making a big step and is already nervous, we don’t need an overzealous inspector terrifying him. Of course the inspector must call it as he sees it, and I would never advocate anything less than full disclosure of all facts. Never should anything be hidden from the buyer.

But no house is perfect, and the building codes 10 years ago were different than today’s. When you buy a house, it must be in good condition FOR IT’S AGE. The smoke detectors, GFIs, spaces between railings, etc., must be to code AT THE TIME THE HOUSE WAS BUILT. It is unreasonable to expect a 10 year old home to be like a new one. If serious problems are discovered, these are definitely a cause for concern. But I’ve seen transactions fail over normal wear cycles in the appliances, just because things were communicated poorly.

The home seller must also be prepared mentally for there to be some repairs, and to not unreasonably refuse to fix anything. I know that the seller thinks nothing is wrong with his “castle”, but most people don’t use everything in their homes. Some people never use the dishwasher, and then we discover that all the rubber is rotten from lack of use. Or many people with two ovens only use one of them, and then find out the other doesn’t work. This can happen to you, so be prepared to do some repairs!

The best way for a seller not to be surprised by these repairs is to do the inspection himself, before selling the house. That’s being proactive rather than reactive. When the report is done up front, the seller can benefit in the following ways:

A. Price the property based on “actual knowledge” of the true condition of the house. You are less likely to be surprised by the fact that the furnace is cracked, the fireplace box needs to be re-built, or an electrical box has been improperly wired.

B. Get repairs done more economically because you have the option to downgrade the materials used from the most expensive grade to an acceptable standard grade of materials. Also, you will have time to get competitive bids on the work, and not be “under the gun” and have to hire the contractors who can get the work done quickly even though they cost more.

C. Obtain cost estimates of the major items indicated in the report that the seller will not be able to or is unwilling to repair. Buyers usually have no idea what things cost, and will inflate the expenses in their minds. Having a written estimate of the work goes a long way in bringing the numbers back down to earth.

D. Strengthen your negotiating position by providing the reports to the buyer before the buyer writes the offer. Therefore, a buyer is less likely to ask you to repair any items if you indicate that you are pricing the property based on estimated repairs that are indicated in the inspection reports.

E. From a legal standpoint, protect yourself when selling your home because you are disclosing everything that you know about the property. With your own real estate transfer disclosure plus the other inspection reports, you are less likely to be found liable for hiding facts which could material effect the desirability or value of the property from a buyer’s standpoint.

So why would a seller NOT do the inspection before selling? Easy – because they don’t want to spend the money. But for a few hundred dollars, you can save thousands and protect yourself and family at the same time.

  The appraisal takes too long or comes in too low.

This happens more often these days as banks are demanding that appraisers be more conservative. If you think about it, appraisers are looking at what happened in the past to decide today’s value, and that’s a problem. Markets can change rapidly based on news, government intervention or public sentiment. Most appraisers know this, and “build in” appreciation or depreciation when deciding on a current value. But how much to adjust is a judgment call, and appraisers will sometimes estimate on the low side.

When the appraisal comes in low, the seller can reduce the price, the buyer can put a larger down payment, or both parties can split the difference. If there’s plenty of time, perhaps the buyer can try a different lender and get a different appraiser.

Another problem surfaces in a hot market when appraisers are swamped with business. The problem is that it takes forever to get an appraisal! What used to take a day now takes a week. So where it used to take 3 days to get an appraiser out to the property, now it takes three weeks. This could be a serious problem if escrow needs to close at a certain time, for example to keep a locked-in interest rate on a loan. The only solution here is to order the appraisal IMMEDIATELY after opening escrow. I’ve seen lenders wait two weeks before ordering the appraisal because “the buyer didn’t send in the check.” Make sure this gets taken care of right away or expensive delays could result.

  Buyer rejects the association documents.

Many properties are part of a homeowner’s association, or maybe more than one association. The buyer of the property will need to be given a copy of the association documents and approve them. The documents include:

Covenants, Codes, & Restrictions (“CC&Rs”) – the rules and regulations homeowners must abide by

Minutes – what was talked about at the most recent association meetings

Financials – the association budget, money set aside for future repairs (“reserves”), etc.

Since the buyer can kill the transaction by disapproving the association documents, it makes sense to get them into his hands as soon as possible, doesn’t it? It’s the seller’s job to give the MOST RECENT documents to the buyer. This means that the seller cannot simply dig them out of the attic and give the buyer the documents from when he bought the house. He has to buy a new set from the association.

Now the association, depending on its size, may or may not get to this as quickly as we would like. We’ve seen associations take 3 or 4 weeks to get the documents out. That means that at the last minute, the escrow can fail if the buyer is spooked by the association documents.

Solution: sellers should get the latest documents from their association BEFORE opening escrow. The documents can be handed to the buyer as soon a purchase agreement is reached, eliminating that contingency. Why don’t sellers do this? Because it costs money to pay for the documents. If the seller didn’t get the documents ahead of time, the buyer should make sure they’re ordered immediately after opening escrow.

  Escrow officer doesn’t follow through.

We’ve already talked about some of the documents that are critical to a transaction, such as the SIs, the CC&Rs, title report, termite report, association documents, etc. The escrow officer is responsible for making sure these are taken care of, but sometimes it doesn’t get done in a timely manner. For example, the SI might be sent in for a judgment check, but the escrow officer “assumes” that since nobody said anything, it must be OK. These kinds of assumptions can really come back to haunt you.

Everything must be followed up on to see that it gets done, and every disclosure, approval, report, and document must be in our file before the escrow can close. So the bottom line is that your agent is the one who is ultimately responsible for everything, and if the escrow officer is slow, incompetent, or too busy, your agent must pick up the slack so that your interests are protected.

We’ve just had a situation where escrow said the title company didn’t do what they were supposed to, and the title company blamed the escrow company. No one wants to accept the blame when something goes wrong because people want to save face and not be held liable for their mistakes. So we’ll never really know what happened there. But we have learned over the years not to depend on anyone, but to check everything ourselves.

The potential for mistakes is greater when escrow companies are very busy, such as in a hot market. There’s no time to handle everything, and no time to train people to help. What happens then is that “crises” are handled first, and your file ends up on the bottom. After all, you’re not closing for a couple of weeks yet, right? But since you’ve read this far, you understand that handling things ahead of time is exactly how you prevent a crisis later. So by putting things off to the last minute, you’re almost GUARANTEED to have a crisis of your very own. It’s your agent’s job to stay on top of all the players in the transaction and to make sure your important transaction doesn’t end up at the bottom of someone’s pile.

  Lender does the old “bait and switch”.

There are many ways things can go wrong with the loan. Interest rates can go up, the mortgage insurance premium (PMI) can be more than the buyer expected, or the loan program can disappear. The fact is, unless the buyer “locks” his loan rate, anything can happen. Why don’t buyers lock in their rates? Again, because it usually costs money to do it. And there are some unscrupulous lenders out there who will tell you one thing when you first meet and then change it at the last minute, knowing that you’re too far along to change lenders.

By the way, since interest rates will change from the time you talk to a lender until the time you actually close, how in the world can you pick a lender based on rates? You should choose a lender based on whether you trust him and believe he has your best interests in mind.

  Lender is not a mortgage banker.

What’s the difference between a mortgage banker and a mortgage broker? A mortgage broker takes your application, and then brings it to the wholesale department of any lender he chooses. In this way, you don’t have to make applications at several lending institutions. You just apply once, and then your lender takes it to whatever bank has the best deal at the time.

A mortgage banker lends their own money. You fill out the application, the loan officer walks down the hall to the underwriter, and you can actually have loan approval in about an hour!

The advantage of using a mortgage banker is control. Everything is done in house, so the loan officer can “pull strings” or do whatever it takes to get your loan through. If there’s a problem with your loan, he walks down the hall and talks to the underwriter and straightens it out. In contrast, the mortgage broker who takes your loan to a bank is out of control. The bank puts those loans at the bottom of the pile. The loan officer can do nothing but wait. I’ve seen this happen more times that I care to remember. It’s no fun at all waiting for weeks past when you thought you were going to move into your new home because the bank hasn’t gotten to your file yet! All you can do is wait while the bank takes care of all their “in-house” loans first.

When the market is busy, like it is now, this can be a critical issue. Having your closing delayed can cost you much more than you thought you were going to save. And what about the “bait and switch”? If the bank pulls this trick, the loan officer is powerless to do anything – he’s not part of that organization, and can’t go to the boss and plead your case. You’re out of control, and that’s a terrible situation to be in.

  Paperwork is not handled in a timely manner.

There can be delays and hang-ups by any of the parties in the transaction. Usually we’re dealing with a low-paid person who can care less that your transaction is critical. For example, the termite inspector does his inspection quickly, but then drops it off on this clerical person’s desk to type it up and mail it out. And there it sits. Then she goes on vacation, and we’re still waiting.

Much of our job is following up with these people to make sure things get done when they’re supposed to. We can’t assume anything, because we’re talking about hundreds of thousands of your dollars here. So we keep calling until we get what we need. Sometimes people have even gotten angry with us for insisting that they do their jobs. “I’ll get around to it” isn’t good enough. That’s how things get screwed up.

Even the buyer and seller can be slow on returning their paperwork. They’ll get a package from escrow and drop it on the dining room table. “I’ll get around to it” they think to themselves. If it wasn’t important, then escrow wouldn’t have sent it to you! Many times critical issues and deadlines are passed because the paperwork is sitting on the table.

Contrary to popular opinion, escrow is not opened when two parties come to an agreement. Escrow is officially opened when escrow has signed instructions from both parties. The seller needs to know that the buyer’s deposit money is not held in escrow until there is an escrow to hold it in! So they go for weeks into a transaction without sending in the escrow instructions, not knowing that there isn’t a dime of the buyer’s deposit holding the transaction together. The buyer can walk away at any time, for no reason at all, and escrow can’t do a thing about it.

In a real estate transaction, “time is of the essence”. This means that all paperwork, reports, and disclosures need to be done as soon as possible. Nothing good can happen by waiting. As time goes on, people become more and more committed to the move. The pain is much less if the transaction falls apart sooner rather than later. So we put a lot of effort into getting things done sooner.


I have written this report for two reasons:

First, I would like to be a consumer advocate for you, your family, your friends and associates and empower you to understand the types of strategies you and they can use in your next real estate transaction. If you know of someone who is either thinking about selling or buying a home, please let me know and I’ll be happy to send a copy of this report to them.

Second, I hope that you see the value of the knowledge and services that we provide. My primary goals for you right now are to let you know that you must PROTECT YOURSELF, YOUR FAMILY, YOUR FRIENDS and YOUR ASSOCIATES. The information provided in this report is just the start of doing that for you. Your situation is unique, and requires customized advice and representation which I can’t give you on a website. Real Estate home selling and purchasing is most likely the biggest financial transaction that you’ll make in your life, so doesn’t it make sense to get the best representation?

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