What are the pros and cons of a long escrow?
What are the pros and cons of a long escrow?
Dear Phyllis,
I read your real estate column and understand that many homes in Glendale 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 for five months. What are the pros and cons of such a long escrow? RT
Dear RT,
In your situation, there are both pros and cons of a long escrow. 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 five months 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 need a prequalified buyer with a verified down payment and FICO (credit) score. Discuss with your Realtor how you can make certain that if the buyer does not close escrow, you are compensated for the time your home was off the market. The buyer should agree in writing to the following:
- They remove all contingencies in writing within 21 days (at most 30).
- 3% earnest money is deposited in escrow.
- If escrow does not close for any reason other than your fault, escrow will release the buyer’s 3% earnest money deposit to you within two weeks of the scheduled closing date. The buyer agrees not to give escrow any further instructions regarding the deposit. If needed, you may grant a two-week extension. If escrow still does not close, escrow will release the deposit to you as liquidated damages.
The last item is critical, and you may wish to discuss that verbiage with a real estate attorney.
