Home-selling tips: When’s the right time to cancel escrow? | SierraSun.com
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Home-selling tips: When’s the right time to cancel escrow?

Nobody likes canceling an escrow. But remember — when one door closes, another one opens.
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Real estate Agents work hard at the beginning of a transaction to prevent problems during the course of the escrow. Buyers get pre-qualified or pre-approved for their loan and counseled about the property and how it will work for them.

Sellers often get property inspections when they list the property and get it ready for market. Regardless of how cautious the Agents are in their early efforts to protect the parties in the transaction, things do happen that can cause a transaction to fail.

Escrows cancel for a variety of reasons. The most common reason for cancellation is the Buyer not being able to get a loan. Property condition surprises are also a common cause for canceling.



Regardless of the reason, most bona fide problems can be solved with time and/or money if the parties are willing to work through them. The seasoned Agent will explore possible solutions that can work to the benefit of both parties, i.e. an extension of time to perform, an adjustment in price or other financial component of the terms such as the owner carrying a small portion of the purchase price. There are many ways to mitigate a problem to prevent having to cancel an escrow.

Buyers must be aware that buying a car, or opening a line of credit to buy furniture before the escrow is closed can impact their ability to get a loan. Surprises can also occur such as forgotten collection items like a $25 nuisance claim from years ago.



That is why it is important to be pre-approved which includes a credit report. Credit or income-to-debt ratio changes during an escrow can kill an escrow.

Sellers, on the other hand, may be surprised by inspection results that call out expensive repairs. If that wasn’t factored in to the sales price considerations and the parties can’t agree on how to handle the repairs it may be time to cancel the escrow. It is usually in everyone’s best interest to negotiate a resolve to an escrow surprise if the parties are reasonable in their expectations.

For example, a new roof will benefit the Buyer much longer than it will the Seller. They will likely sell prior to the roof reaching the end of its life expectancy and they have the security and aesthetic pleasure of having a new roof in the interim. A reasonable split can usually be negotiated, but if not a Seller may cancel and try to get more money with a new roof from another Buyer.

When it is apparent that an escrow has terminal problems it is important that the information be shared as soon as possible. Agents will work to solve the problems until there is no apparent resolve.

At that time they should inform the other party that the problems are irreparable and that the escrow must be canceled. That allows the other party to find another house or another Buyer depending on which side of the transaction they are on.

Our Advice: Sometimes things just happen along the way that couldn’t be foreseen and can’t be resolved. When that happens it is time to cancel the escrow so everyone can get on with their lives. The timing is important, not too soon and not too late.

A simple change of mind isn’t a good reason to cancel an escrow, but if they are in a position to not perform later without penalty in accordance with the terms of the contract it is usually best to let them go. If there are real damages you may have a legal claim against the non-performing party, but be realistic in your assessment of the risk of litigation, sans emotion. 

Nobody likes canceling an escrow after investing so much time and emotion in the collective effort of putting it together and moving it along. It is best for everyone, however, to let it go if it has “flat lined.”


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