Cancelled Escrow Protection

Protect yourself from the disappointment – and expense – of a cancelled escrow. No one anticipates falling out of escrow. After all, you wouldn’t make an offer on a house unless you really wanted it. But houses fall out of escrow all the time for numerous reasons. The most common of which is a low appraisal.

Most home buyers purchase a house at the top of their budget. They put all of their cash together for a down payment. They get qualified for the maximum loan possible so they are ready to make an offer when the right house comes along. The lucky home shoppers get their offer accepted, and voila they are in escrow. Now the hard part.

If an appraisal comes back too low, the bank may reject the loan or reduce the amount they will lend. If the seller won’t reduce the price, the buyer has to scramble to raise more cash to cover the difference. Often, this leaves the buyer no choice but to cancel the purchase and find another house.

Cancelled escrows can also be caused by unforeseen repairs identified by the home inspection. If significant repairs turn up, the buyer has two choices. They can either ask the seller to make the repairs or buy the house and pay for the repairs. If paying for the repairs is not an option, and the seller won’t fix the items, again the buyer may have to cancel.

Other issues can cause the sale to fall apart such as liens, unreasonable sellers, credit problems, a change in interest rates, etc.

Placing an offer on a second house comes with all of the same perils and costs. But you can protect yourself from paying full price for a second home inspection.