What are the pitfalls of a long escrow?
I read your real estate column and understand that most homes are selling quickly. But I have a higher valued home which has been on and off the market for nearly a year. My agent brought me an offer but the buyer doesn’t want to close until March. What are the pros and cons of such a long escrow?RT
You are correct that many luxury homes are taking longer to sell. I am not sure of your circumstances but let’s assume that the offered price meets your expectations and that closing in March doesn’t present any negative implications (tax or otherwise).
My primary concern is that your home will be off the market for several months. You want to be certain that the buyer is prequalified, that your Realtor® has verified their down payment and FICO (credit) score. Discuss with your Realtor® how you can make certain that if the buyer does not close escrow, that you are compensated for the time your home was off market. The buyer should agree in writing to the following:
1) They remove all contingencies in writing within 21 days (at most 30).
2) 3% earnest money is deposited in escrow.
3) In the event escrow does not close for any reason other than seller’s fault, that the buyer’s 3% earnest money deposit be released to seller no later than two weeks after scheduled close of escrow. Buyer should further agree that there be no further instructions to escrow about the deposit. If needed seller will grant a two week extension but after extension passes, deposit will be released to seller to be retained as liquidated damages.
Number 3 is very important and you may wish to discuss that verbiage with a real estate attorney.