9 Things Sellers Should Watch Out for During Escrow


When selling real estate, such as a home or condo, you'll have to go through escrow — a process in which a third party holds your property and the buyer's funds until both you and buyer meet your contractual obligations.

While waiting for your home to close can feel like forever (average escrow time ranges from 30 to 40 days, depending on the state and type of sale), escrow is a necessary process to make sure that your buyer is capable of making payments and your property is thoroughly inspected. Here are some key things you should do to make sure that your escrow period goes smoothly.

1. Fine tune your property's description

When you receive a first offer from a buyer, you'll notice that the offer will include a clause with a description of your property. It's best practice to add to the description, "Exact legal description to follow in escrow." This is to cover the possibility that some material changes are found during the escrow process and to set the expectation that such changes could happen. For example, an escrow officer may uncover clerical or filing errors that could affect the deed or survey of your property. Once the full legal description of your property is set by your escrow company, the company will include that lengthy description in the title report.

2. Limit additional prorations and closing adjustments

During escrow, you should continue paying all obligations related to your property, such as mortgage payments, insurance premiums, taxes, and homeowner's dues. However, your costs will be prorated once you close, usually based on a 30-day month. (The terms of the proration are usually spelled out in the purchase contract.) For example, if you were to close your sale on the ninth of the month, you would be responsible for the first nine days of the month and you would receive a refund for the other 21 days in your final payment.

Watch out if a buyer sneaks the words "any other acceptable to buyer" into the list of prorations and closing adjustments. This would open the door for a buyer to include expenses that aren't really your responsibility, such as the installation of a central air conditioning unit or keyless entry system not discussed prior to sale. If you see the phrase, "any other acceptable to buyer," include an instruction in your counteroffer to delete that description and replace with "none."

3. Keep the definition of your title objective

In your offer, you'll find a section that describes all aspects regarding the title of your property. In there, a clause will state that you agree to convey your property to the buyer free and clear of all liens and encumbrances save for some exceptions, such as an easement (somebody having the legal right to cross your property without owning it) or a rule from a homeowner's association.

Under this clause, again look out for a buyer including "any other acceptable to buyer" in the list of exceptions, which could cause delays in escrow. It's best to delete those words and replace them with "exceptions of record." Examples of exceptions of record are the discovery that a third party, such as a mortgage lender or the federal government, have a monetary claim to your property or a neighbor has invaded your property without you realizing (such as with a misplaced fence). This way, title exceptions will be set objectively and not be subject to opinions.

4. Tighten time frames for buyer's obligations

During escrow, it may seem that the seller has a long list of obligations to meet. In reality, the buyer also has several obligations, such as acting in good faith to obtain a mortgage loan, if applicable; delivering an approval letter of the mortgage; and providing actual payment.

Ask your agent what time frames are appropriate for a buyer to complete these and other obligations. Use those benchmarks to evaluate the number of days presented by your buyer to complete those tasks. Depending on your scheduled closing date, you'll often find that those time frames can be shortened.

5. Shorten time for review of seller's disclosure

As part of the escrow, you'll have to fully and accurately disclose in writing to your buyer any fact, defect, or condition that would be expected to measurably affect the value of your property. Some examples include water damage to a wooden floor, a nasty carpet stain, or termite damage. The rule of thumb is that the more you disclose, the better. It demonstrates that you're acting in good faith and accurately describing your property.

Since you put so much time and effort into this long list of disclosures, you want your buyer to review it and commit to it within a short period of time. Talk with your agent about what is an appropriate review time for the seller's disclosure in your local housing market.

6. Budget for buyer's contingencies

During the inspection, a buyer will go beyond the items that you disclosed and will also focus on his or her own checklist. Here are some examples of items that your buyer could be on the lookout for:

  • Installation of smoke detectors.
  • Inspection of moisture in a bathroom, kitchen, or other room.
  • Proper grounding of electrical outlets.
  • Installation of a ground fault circuit interrupter (GFCI) near a bathroom sink.
  • Replacement of broken faceplates at outlets.

Plan ahead for such expenses and build a cushion in the original listing price and counteroffer price, if applicable, to cover for such contingencies. While you want to sell your property sooner rather than later, you also want to make sure that you settle on a price high enough to cover these and all other expenses involved in the sale. Most real estate agents can show you a list of preferred contractors who can provide you quotes at reasonable prices.

7. Take out clauses to deliver existing warranties and plans

In the spirit of knowing what they're really getting themselves into, a buyer may include a clause to bind you to submit at closing all warranty documents covering improvements of the property, instruction booklets for included appliances, original blueprints of architectural or engineering drawings, and other types of documents.

Save yourself a headache and mark such clauses as "not applicable." When you're in the process of emptying your home, chances are you won't be able to find those documents or will misplace them. Don't commit to delivering those documents in writing, but feel free to provide them if they're readily available.

8. Limit scope of last-minute cleanings

When you got your property showing-ready, you probably spent big bucks in getting carpets professionally shampooed, windows professionally cleaned, and bathrooms scrubbed down. Keep all receipts for those expenses and don't budge at requests to repeat cleaning services a couple of days before closing. As long as you've done a good job to maintain the cleanliness of your home, especially if you already moved out before listing, there's no real reason to do a deep cleaning again.

9. Double check for addendums

In addition to combing through the contract, you'll also want to read through any addendums made by the buyer that could replace the rules of the contract in case of a conflict. Here are three addendums to watch out for:

  • Request to remedy unpermitted work: In this scenario, a buyer would ask you to get permits for any renovations completed without one. You shouldn't agree to this type of addendum because there are many instances in which you can complete renovations without a permit. Depending on homeowner's association bylaws, some renovations may not require a permit at all, such as the installation of a bathroom sink or replacement of kitchen cabinets. Other type of work completed before a bylaw being introduced may be exempt of a requirement, such as noise proofing of a wooden floor.
  • Concession: Reject clauses that allow the buyer to submit a repair or credit request in writing. While the buyer has the right to inspect your property in different ways, you should be the one deciding on how to procure acceptable ways to comply with the buyer's requests.
  • Timeline contingency: The longer the escrow process lasts, the greater the chance for a sale to fall through. Delete in its entirety any timeline addenda requesting if a deadline falls on a weekend or federal or state holiday that it be moved to the next business day.

Escrow is the final stretch of a home sale. Keep a positive attitude and stay in touch with your escrow officer and agent. You got this!

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