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Potential Delays and Complications in the Closing of Your Home

Once a contract has been agreed upon, the buyer and seller enter a period of open escrow, where the details of the contract must be satisfied before the sale can be closed. During open escrow, the buyer makes a good-faith deposit, which will be returned to the buyer at the end of the sale, or will be applied to the closing costs. During this time, there are several complications that can come up.

Inspection Surprises

All buyers will have inspections done, and inspections always turn up something. Hopefully, it is something that either you the seller, or the buyer, can fix at a reasonable cost. But what if the inspection reveals something more serious, such as problems with the roof, the foundation, or even termites? There are some problems with the home that will cause the buyer to walk away from the deal entirely. If something causes you to drop the sale price lower than even makes the sale reasonable to complete, consider calling off the sale yourself.

Making Repairs vs. Dropping the Sale Price

If the inspection reveals serious problems that come as a surprise, the buyer is going to want to negotiate on the sale price. When choosing between fixing the problems yourself or dropping the sale price, consider what percentage of the sale the fix ultimately costs.

If a fix is less than 5% of the sale price, then offer to fix it yourself. If the fix is more serious (let’s say, more than 10% of the sale price), then you might want to lower your offer. This is not only because of the expense of the fix but also because of the time that may be involved. Keep in mind, the higher the price tag on a repair, the longer it will be before you can move out.

Defects in the Title

Properties that have changed titles in the last twenty years should have no problem, and for the most part, title companies do a good job of clearing the title promptly. But occasionally there are problems with the title, especially if the home is older, and you’ll have to go to court. This process in itself can take a couple months and will require you to spend a lot of time with your real estate attorney. This is why bringing in a dependable attorney who you trust early on in the process is invaluable.

  • Are there liens against the current title that could impact the sale of the home?
  • Will the new buyer be purchasing Title Insurance?

A title report should be issued before escrow is closed. In most cases, the buyer’s lender will order a title report. The title report will show the chain of ownership for the property. Most title reports have nothing out of the ordinary in them and simply include tax assessments. Every once in a while, there will be a problem with the title, and problems with the title can often end up in court. Title problems can cause delays in the sale of the home, or they may cause the whole sale to fall through. Common title problems include; Unpaid property taxes, Contractor liens, or Identity issues. Title problems happen more often with older homes. If your home has been built in the last 30 years, there is likely no problems with the title.

How to make sure the title is in order

For most home sales, requesting a title report is a perfunctory step in the home-selling journey, either triggered by the buyer when they take out a loan, or otherwise obtained by the homeowner during escrow. Sometimes, though, there are problems with the title, and these issues can be both costly and time-consuming. If you have questions about your title, you can request a report from the title officer before you ever put your home on the market. Here is a breakdown of some common title problems, if problems do come up.

  1. IRS Lien/Unpaid Property Taxes: While they can be costly, this is one of the easier title problems to fix. This one can often be paid to the escrow company at closing. If the amount of the back taxes is enough to jeopardize the sale, it’s possible that paying off these back taxes could become part of the negotiation with the buyer.
  2. Contractor Lien: Contractor can file a lien against a property for any unpaid work they have done. To get the lien removed, the contractor in question has to be contacted.
  3. Judgement: Sometimes an unpaid debt can trigger a lien on your property. This means that the creditor went to court to obtain the judgment. This is another case of a lien not being removed until a debt is paid off.
  4. Identity Issue: This happens when someone with the same name as you has judgments against them. In this case, you will have to fill out a court-approved affidavit that states you are a different person.

Survey Issues

One similar issue as a title problem is a problem with the survey. This pertains more to rural homes than suburban or urban homes, but if your buyer’s loan company requests a survey, make sure to double check things. Surveys can reveal problems with encroachment, where other properties have encroached on your home’s land.

Back to: Closing on your home sale

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