Why Escrows Fail

• When home sellers accept purchase offers for their homes, escrow accounts are opened for handling funds due buyers and sellers, and for researching and verifying clear and legal title to the property being sold. Escrows typically last from 60 to 90 days, but can be delayed for reasons, including sellers or buyers filing for bankruptcy or divorce, physical problems with the property, or buyers failing to qualify for purchase money mortgage loans. Legal issues affecting the property being transferred can also delay or halt the escrow process and cause the sale to "fall through."
  
  

Title Problems

• Public records affecting title to real property are examined prior to transferring title. Title companies or real estate attorneys examine the status of title, including property taxes, assessments, mortgage loans and how title is held in the property owner's names. Title problems, including property and income tax liens, mortgage amounts owed and legitimacy of title held by the property owners, must be resolved before title is transferred and/or an escrow can close. Title problems may involve lot lines, survey problems, improper title transfer documents, failure to record transfer documents or unresolved title disputes affecting the property.
  
  

Buyers' Mortgage Financing

• Buyers typically make an offer on a home and apply for mortgage financing during escrow. Mortgage loans require documentation of income, assets, obligations and satisfactory credit scores. Buyers failing to qualify for mortgage loans cause real estate transfers and escrows to fall apart. Questions about any aspect of a buyer's loan application can stall or crash an escrow. Mortgage lenders also require formal appraisals of the property they're financing, and problems with the home's condition or value can invalidate the purchase offer and escrow. Changing mortgage rates can also impact an escrow; a sudden spike in mortgage interest rates or high lender costs can cause home sales to fall through.
  
  

Escrow Negotiations and Legal Obstacles

• Escrow terms and funds disbursed between buyers and sellers can change during the course of an escrow. A buyer may request credits from sellers for required repairs identified by a home inspector or appraiser. Such findings must be resolved before title can be transferred. Buyers may request sellers to pay part of the buyers' closing costs. Failing to negotiate these situations can cause real estate escrows to fall through. Less frequent obstacles to completing an escrow may involve legal problems relating to unauthorized title transfers occurring during the escrow period. Legal issues may require court action and can delay or postpone an escrow closing for months.