Whether you’re buying or selling a residential property, you’re hoping that nothing new or surprising arises during the escrow period. Escrow is typically uneventful, but on the occasions where things go wrong, the entire deal can be thrown into jeopardy and go wrong in closing. Learn more about the problems that can arise during escrow, and speak with a seasoned San Diego real estate attorney if you’re planning to invest in residential real estate in southern California.
The appraisal is lower than anticipated
The value placed on the home for sale by a professional appraiser can make or break a sale. If an appraisal comes back much lower than the price at which the home was sold, this could cause financing to fall through. In some cases, the sale can be saved by a motivated seller agreeing to lower the selling price, which will permit the buyer to maintain their financing.
The buyer takes on a large amount of debt
When considering an application for financing, a lender will look at the buyer’s income-to-debt ratio. If that ratio is sufficiently balanced at the time of the mortgage application—i.e., the buyer makes plenty of money to cover any existing debts, and can afford the addition of a mortgage—then this will make the loan approval more likely. However, a buyer’s subsequent purchase could put their application in jeopardy. If, say, the buyer receives approval for a home loan and, during escrow, purchases a costly vehicle for which they receive financing, they could alter their income-to-debt ratio substantially.
The buyer loses approval for a loan
While a buyer may be responsible if their loan eligibility changes due to a major purchase, sometimes loan approval is lost for reasons totally outside of the intended buyer’s control. For example, changing interest rates could cause the buyer’s planned monthly payment to rise to a point where it’s no longer affordable.
The final walkthrough reveals major problems
If you’re purchasing a house with plans to do substantial renovations, you may not be worried about what you’ll find on a final walkthrough. Nevertheless, you may end up surprised by what you find. In some cases, especially where a home was sold due to foreclosure or via short sale, disgruntled former owners may have gutted the home on the way out. Others may leave heaps of trash behind. It’s unlikely, but serious damage to the home does occasionally arise shortly before escrow is slated to close.
If you need professional legal help with a real estate issue in Southern California, contact the seasoned and effective San Diego real estate lawyer Jon Alan Enochs for a confidential consultation at 619-421-3956.