Common Problems and Disputes Buyers Encounter During Close of Escrow

Learn more about situations that other home buyers have faced at or around the closing date of their home purchase.

Learn more about situations that other home buyers have faced near the close of escrow.

What do I do if home sellers took an item they had promised to leave as part of the sale?

It depends. If the home seller's agreement to leave the item was put into writing in the Purchase and Sale Agreement (“P&S”), then you do have some recourse. If not, you may be out of luck.

The P&S specifies the condition in which the seller must deliver the property, including what items are staying. If during your final walk-through you find that the condition is not the same as is specified in the P&S or that items are missing, you likely have the ability to delay or cancel the closing (again, depending on the terms of the P&S).

However, you probably do not want to cancel the home purchase simply because of a missing item. A delay of the closing may be more reasonable, assuming the moving truck is not already filled with your belongings and in transit.

You could delay the closing for a day or two until the seller can bring the item back to the house. A more likely resolution would be to negotiate reimbursement for the cost of replacing the item.

If you are located in a state where you have an attorney representing you in the purchase (such as Massachusetts), your attorney should be able to negotiate either compensation from the sellers or a delay to the closing. If you are in a non-attorney state, your real estate agent should be able to handle this same negotiation.

One caveat: Before delaying or changing the closing date, check with your lender to make sure this doesn't affect your approval or ability to close. Loan approvals often contain dates by which the rate or underwriting documents expire. Closings that occur beyond those dates may need to go back to the lender for a new approval.

Odds are that the seller needs the transaction to move forward in a timely manner too and will either bring the item back promptly or compensate you for the cost.

I couldn't get a mortgage: Can I get my earnest money back?

Whether you get your earnest money back depends on the deadlines outlined in your purchase and sale agreement (P&S). Many contracts contain two applicable deadlines:

  • the deadline by which you had to submit an application for a loan to a lender, and
  • the deadline by which you must be certain that you can obtain a loan that you're comfortable with (also known as the loan contingency deadline).

The former deadline often comes at the beginning of the purchase process, while the latter is often the last deadline prior to closing.

If you can demonstrate that you timely submitted an application to the lender (it sounds from your question like you’ve been diligent about the process), and if the loan contingency deadline hasn’t passed, you should be able to get your earnest money back.

Read the P&S carefully to find out how you need to notify the seller of your intent to back out of the contract.

If, on the other hand, the loan contingency deadline has passed, you're at risk of losing your earnest money. So close to closing, the seller has likely moved from the property or is in the process of doing so. The seller has suffered losses from having the property off the market for so long, and will have to restart the search for a buyer. Thus most real estate purchase contracts will dictate that the seller now has the right to retain your earnest money.

However, it can’t hurt to explain your situation to the seller and ask for a full or partial return of your earnest money. Too often, parties to transactions forget that there is a real person on the other side. The seller may decide to let you have the earnest money back; you never know.

Mortgage lender doesn't require flood insurance, but the house is in a flood zone: Should I buy flood insurance?

Flooding is the United States's most common natural disaster, affecting people who live nowhere near water. Melting snow, overflowing creeks or ponds, a weak levee, or water running down a steep hill can all cause flooding. Talk to your local flood control board or municipal building department to find out the likely risks.

The good news is, flood insurance is cheaper if you're not in a flood zone. Standard homeowners' policies don't cover damage from flooding, but flood insurance is available from the National Flood Insurance Program (www.floodsmart.gov).

Many consider the coverage limits too low, however, so you might want to buy additional coverage, called "excess" flood insurance, from a specialized company (which may be available through your current homeowners' insurance provider).

What do I do if a lender's home appraisal says the house is worth less than the purchase price?

A faulty appraisal shouldn't and needn't derail your sale. Appraisers operate under a set of national rules known as the Uniform Standards of Professional Appraisal Practice, found on the Appraisal Foundation's website. They are expected to understand the nuances of the local market. If your appraiser doesn't (as is all too common), you have grounds upon which to demand that another appraiser be sent to evaluate the house you're planning to buy or sell.

You might also look elsewhere for a loan, hoping to encounter a more generous appraiser.

If none of these options work, the seller will have to decide whether to accept a lower price—likely the appraised value.

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