As a real estate agent serving Silicon Valley for over a decade, I have seen firsthand the excitement, anticipation, and anxiety that encompasses the closing process of a real estate transaction. Many believe that once the sales agreement is signed, everything will go smoothly and the process should almost take care of itself. However, the reality is quite different and there are often bumps and obstacles during the escrow period after a sales agreement is signed.
Understanding Real Estate Closings
Real estate closings are the final steps in a property transaction. After a purchase agreement is signed, the process to transfer ownership begins. This usually involves several entities, including real estate agents, buyers, sellers, lenders, inspectors, appraisers, underwriters, processors, funders, notaries, a neutral third party, usually an escrow company (but in some states, it can be an attorney), a title company, and the county recorder’s office. It’s estimated that more than 50 people will “touch” a real estate transaction from beginning to end.
Once a real estate transaction is “in contract”, the escrow/title company or attorney plays a crucial role and their job is to take the transaction to a smooth closing. They do this by conducting a title search, underwriting title insurance, managing all necessary monies and documents, coordinating timelines and communications, arranging signing and recording, calculating prorations, balancing numbers, and dispersing money to the different parties involved in the transaction. The closing process is complex and involves many groups of people working together, which leaves room for potential miscommunications and delays.
Potential Issues That May Arise During a Transaction
Title Issues
A title search may find issues such as liens, unpaid taxes, bankruptcy, or other clouds on the title that will affect the transfer of ownership. For example, there may be loans that the owners have paid off but the reconveyance was never recorded, hence the loan is still showing on title. In addition, the title report shows the information for a property for a specific snapshot. New liens and bankruptcy filing can be recorded after the last title report was generated. Hence things can be constantly changing and surprises may still show up at the very last minute before closing. If any new information shows up, escrow will need to review the information and take action accordingly.
Financing Issues
The borrower’s financial situation may change during the transaction. Changes in credit score, employment/visa status, debt-to-income ratio, large sums of undocumented deposits/ withdrawals on the borrower’s bank statement, or death could all result in the bank halting the existing loan process. These situations can require additional underwriting reviews or in the worst case, denial of the loan. All of the above can cause delays in the escrow period.
Appraisal and Inspection Issues
If the appraisal comes in lower than the purchase price, the buyer may request a rebuttal of the appraisal which often takes a few days to complete. In one extreme case, a 2nd appraisal was ordered on one of my sales. Similarly, buyers may find critical issues during the final walkthrough inspection that could trigger a renegotiation with the sellers. All of the above are issues that could happen during a transaction that could result in delays.
Human Error
Despite the digital age we live in, real estate transactions still involve a significant amount of paperwork. It's not uncommon for errors to be found - Incorrect names, misspellings of names, wrong dates in the loan docs, incorrect rates/terms for the loan, wrong calculation of the proration, missed invoices or overages, or just simply missed signatures in the notary signing process can all result in delays.
Issues Beyond Agent’s Control
Delays can occur due to things that are beyond anyone’s control - power outages or system failures at the county office or the bank. A wire that has been sent but is taking a particularly long time to arrive. Staffing issues or an exceptionally high volume at the county recorder’s office. All the above is only a fraction of the issues that could arise that are completely out of the agent’s control.
Navigating Challenges and Solutions
When issues arise, it's important to remember that your real estate agent, while invested in the success of the transaction, is at the mercy of other parties performing their jobs and being professional, punctual, and communicative.
The Role of Your Agent
You may only buy or sell homes a few times in your lifetime. Your agent, with the right experience and expertise, plays an important role and should be heading off problems before they arise as much as possible, or when issues arise, providing the necessary options, support, and guidance. Your agent should stay committed and communicative with you throughout the process until you reach the close of escrow.
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The Journey to Closing
In the grand journey of buying or selling a home, it's essential to understand that real estate transactions are not an exact science, and many factors can influence the timeline and outcome.
The real estate buying and selling journey may have unexpected twists and turns, but remember that your real estate agent is there to provide support, guidance, and reassurance every step of the way. As a former certified project management professional (PMP) in the tech industry, I have plenty of experience in project management, execution, and handling unexpected events and problems during a project. I have plenty of successful sales under my belt and I invite you to set up an appointment with me and see how I can make your real estate journey less stressful, more empowering, and more enjoyable. Please contact me here or via phone at (408) 480-9312.
