Here is part 2 of our 3 part series of What is Escrow and What it Does


What factors are involved during the escrow period?

  • Various parties must perform due diligence to assure all elements are acceptable so the loan can be funded.
  • The elements during an escrow where the buyer is obtaining a loan include.
  • The home’s appraised value
  • Buyer’s income
  • Buyer’s employment history.
  • Typically, the escrow fees are covered by your closing costs.


         What causes escrow to fall through?

As many homeowners know various outcomes can slow or even end the escrow.

  • If a home does not appraise at the purchase price, that can be the main factor that ties the process up. For example, a home that is on the market for $750,000 and goes under a contract for that price could only be appraised for $735,000. If that happens, the lender may not lend until the price is reduced or, in some cases, the lender may still move forward if the buyer is able to bring in a larger down payment. When one or both parties aren’t willing or able to reduce the sales price,  it can lead to falling out of escrow.
  • One of the most common reasons for an escrow to cancel is the buyer not being able to obtain financing, even with a preapproval letter. Lenders tend to be very willing to write a preapproval letter to a buyer, but when it comes down to it after the lender performs its thorough loan-approval process, the buyer might not qualify for a loan.
  • The buyer doesn’t always find out right away even if they are approved, it could be well into the transaction before we get final approval. This is where the loan contingency comes into play. I will have an article next week on the contingencies needed in a real estate transaction
  • Another typical scenario is when a buyer asks for excessive repairs and the seller isn’t willing to provide them. The buyer might want all-new windows. But the seller might just say no and go on to a new buyer.
  • “I’ve even had escrows cancel because there was litigation against the HOA,  I even had one fall out because the buyer was a symphony cellist, but the HOA rules said no instruments were allowed to be played in the home.”


Tomorrow I will post part 3 and next week I will bring you a series on disclosures



Robert Schmalz - Broker / Founder

West Los Angeles Real Estate Group

An Independent California Licensed Realty

California Broker Lic #01813025



"Helping Guide Clients Through The Economic Complexities Of Real Estate By Knowing Their Wants And Needs"