It's the moment you've waited for. The offers rolled in on your home listing and you've finally accepted one. Done. You're opening escrow. But what happens if something goes wrong, such as the home doesn't appraise equal to the agreed sales price in the purchase agreement or the buyer backs out?
You're left with your boxes packed and no way to go because the deal didn't go through as planned and you're still left paying your mortgage.
Here are a few tips to to help reduce the chances of falling out of escrow.
Tell all. Of course, disclosure is law but it's worth a reminder. Make sure you tell your agent everything about your home. If you were buying this home, what would you want to know? Don't hide anything. Be honest and disclose.
Accept only pre-approved buyers. Sounds basic but, if overlooked, this can kill a deal fast. Make sure the only things that have to be done are have the home appraised and have an inspection. Your agent can require that all offers be reviewed for cross qualification by a preferred lender so that it ensures the buyers are, indeed, able and ready to buy your home.
Require an earnest money deposit. If you're taking your home off the market and putting up a sign that it's in escrow, your agent will want to make sure that you're protected in case, for some reason, the buyer doesn't come through. Having an earnest money deposit from the buyer shows a commitment to purchase your home.
How much an earnest money deposit is depends on a few factors such as any state limitations, the current real estate market (such as if bidding wars are occurring), and any requirements your listing agent may negotiate. If the buyer doesn't complete the deal, a portion or all (depending on how the purchase agreement is written) of the deposit money may go to you. It may be painful to have to re-list your home but this, at least, helps take away some of the sting. If there are serious issues with the home that you didn't disclose, the money would likely be returned to the non-buyer in its entirety.
So, disclose! If the deal goes through, the earnest money deposit goes toward the down payment and closing costs.
Make sure buyer contingencies are removed in a timely fashion. The contingency period allows a limited time for a buyer to walk away from the deal without a penalty or losing earnest money if something wrong is discovered. Your agent and you can discuss the details and specifics for your location and marketplace.
The buyer will have a home inspection done before removing contingencies. This allows the buyer to ensure that the home is in order. Staying informed and keeping track of the contingency removal is an important part of ensuring a smooth close of escrow.
If you take these precautions and you talk with your agent about the offers that come in and what makes a certain offer the strongest, such as all-cash offers, large down payments, ability and willingness to bridge a financial gap (should one occur) – for instance, if the home doesn't appraise for the sales price, then you're more likely to have a solid deal that will result in the sale of your home.