Generally speaking, a timely close of escrow is considered a successful one. A single mishap during escrow, however, can derail the schedule (and potentially cost you money). We’ll walk you through how to avoid some common pitfalls when closing escrow on a home.
1. Not sticking to your closing timeline
In addition to laying out the terms of the transaction, your purchase agreement essentially functions as one large timeline that outlines exactly what needs to happen — and when — in order to keep the transaction moving forward. There will be specific windows of time allocated to complete various aspects of the transaction from inspections to securing financing to appraisals.
As a buyer, you’ll want to adhere to these deadlines as failure to do so could find in breach of contract. If this happens, the consequences could include a nullification of the purchase agreement and forfeiture of your earnest money deposit to the seller.
2. Forgetting to follow up
While we’re on the subject of meeting deadlines, it’s crucial to realize that you’re not the only one following them. Everyone, from the home inspector to your mortgage loan officer, is responsible for doing their part (and on time) to help you fulfill your contractual obligation. That said, sometimes even the most crucial deadlines can fall off the radar — which is why you should never be afraid to follow up.
Let’s say, for instance, that you have a total of 14 days to do your inspections. In that time, you need to get on the inspection company’s schedule; they need to come out to inspect the house; and you’ll need to give them time to generate a report. Then, you’ll need to read over the report carefully and submit a list of negotiable repairs for the sellers’ approval.
So, what happens if, by day 11, you don’t have the report in hand?
Don’t be afraid to be the squeaky wheel. It’s well within your rights to follow up with the inspector if a deadline is quickly approaching and you have yet to receive an update. The same is true for your mortgage rep, appraiser, and even the agent with whom you’re working.
As with any business situation, you’ll want to be polite and courteous, but making sure you close the deal on time is your responsibility, too. After all, you’re the only one who’ll end up with a house at the end of this process.
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3. Making big purchases during the escrow period
This is a big one. It’s important to refrain from making any financial decisions that could alter your credit report after getting a pre-approval. Why? Well, getting pre-approved for a mortgage isn’t a guarantee that it will be funded. After the lender receives your application, you have to go through a process called underwriting, where the bank vets your finances to ensure that you can handle your proposed mortgage payments.
This means that doing things that negatively impact your debt-to-income ratio (like financing of new car or making a large furniture purchase using your credit cards) should be avoided until after underwriting is complete. You’ll want your finances to look as healthy and stable as possible during this process.
During this time, any big financial maneuvers (including changing jobs) need to be well thought out and properly documented and this is one instance where it’s much better to be safe than sorry.
While the closing stages of escrow does, indeed, put you in the homestretch of the overall process, it’s not over until it’s over. It’s important to remain vigilant about doing your due diligence to ensure your closing is timely, stress-free and successful.
This article is not a substitute for advice from a licensed real estate agent regarding your particular situation. This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.