The typical escrow “fall-out ratio” on the Westside is above 20 percent, according to local escrow officers. This is due to several factors, some of which might be avoided by dealing with them in advance. Careful attention to a great many details increases the percentage of successful closings. Many of the following suggested actions are simply to avoid any last-minute surprises to the buyer.
1. Do property pre-inspections and have the reports available for prospective buyers to review before they write an offer, or at least to have on hand to include with the counter-offer. These inspections should include a general building inspection and pest control (termite) report. The purpose of these inspections is to open an escrow with the buyer agreeing that the property will be in the condition “as is” described in the reports.
2. Complete all required property disclosure reports and order all necessary public reports about the area before starting property showings.
3. Consider getting a C.L.U.E. (Comprehensive Loss Underwriting Exchange) report if there is any possibility that an insurance claim was made on your property in the last five years. Have copies available of any explanatory documents such as receipts, correspondence with your own insurance company at the time of the claim, etc. If there are any claims listed on the seller’s property, the buyer’s insurance company will be unable to provide insurance coverage. If insurance coverage is not obtained, or if it is not satisfactory to the lender, the lender will not fund the buyer’s loan(s).
4. Have your agent request that the buyer provide a lender’s pre-approval letter with their offer.
5. Have the buyer provide a verification of funds. If they do not have the necessary down payment and funds for closing costs, the escrow may be at risk from the beginning.
6. Find out exactly who will be getting the loan, and request that the lender check the credit under that name(s).
7. Be sure that the buyer’s earnest money deposit is large enough. A customary amount is three percent of the total purchase price. Most contracts include buyer and seller initials on a “liquidated damages” clause in the contract to show good faith.
8. Try to shorten any time periods for contingency removals in the purchase contract.
9. You could request that the buyer arrange for homeowner’s insurance at the beginning of escrow.
10. Be sure that your agent is sensitive to buyer’s psychology, and stays in touch regularly throughout the escrow with the goal of keeping the buyer in a positive frame of mind.
11. Maintain a positive mental attitude yourself and keep a good energy level active all the way to closing day! It is also helpful to be flexible and allow buyers to have periodic access during escrow for doing measurements and getting input from decorators, architects, or contractors.
12. Ask your agent to do everything possible to have a “back-up” contract signed. In case the buyer cancels escrow during contingency periods, the seller could have far less delay in the sale process by having another buyer already in place. Just having a “back-up” buyer in place may also help keep the first buyer in escrow, as they would know they could lose the property to the back-up buyer if they do not promptly remove contingencies.
Michael Edlen has been a top-producing agent since 1996 practicing pro-active steps such as the above. His escrow “fall-out ratio” is less than half that of the average in this area. He can be reached at 310. 230.7373 or through his website, www.MichaelEdlen.com.