What Can Delay an Escrow?

An escrow process is the process you go through when a property changes owners, so whether you’re a buyer or a seller, you generally don’t want to delay it. These days most escrows take about 45 days; a few can be quicker and some can be much, much longer.

To keep things moving it’s best to communicate even the most seemingly inconsequential details with your Realtor and your escrow officer. Here’s a list of issues, big and small, that can delay or derail your escrow.

If you are using a power of attorney to sell a property, you’ll want to mention this ahead of time because some powers of attorney cannot be used this way.

If the property is owned by a trust, be sure to mention it so the proper papers can be drawn up. This is no big deal, but the paperwork needs to be right.

If you are a real estate investor hoping to accomplish a 1031 Exchange, plan ahead. In a 1031 Exchange, you can use the proceeds from the sale of one real estate investment property to purchase another real estate investment property, and defer paying taxes on capital gains that would be due without the exchange. When you sell an investment property and reinvest the funds, there are restrictions regarding which properties qualify and how quickly you need to complete the second transaction. And you’ll need to choose an accommodator—the person who will hold the proceeds from the sale of your investment property until you identify and close escrow on the replacement property. These are not big hurdles, but they do take time.

Another potential hurdle arises if you’re selling a property for which any of the people listed on the title have died. If this is the case, you’ll need official (certified) copies of their death certificates, and perhaps an affidavit of death of joint tenants or information from the executor of the estate; you may even need a court order. As soon as the courts are involved, major delays may be, too.

Court orders can be required for several situations: if a buyer or seller has ever filed for bankruptcy, if a minor under 18 wants to sell his or her property, if a property owner is declared incompetent and the conservator wants to sell the property, and the list goes on.

Things can get really messy if joint property owners are in the middle of a divorce or if a divorced couple did not separate assets cleanly when they ended their marriage. In the case of a divorce-in-progress, either side can hold real estate hostage to other divorce demands, and that can extend an escrow indefinitely. And a seller cannot sell a property unilaterally if the ex-spouse’s name is still on the title. He or she will have to ask the ex to sign off on the sale, which may require the seller to track down his ex-wife while she is on an extended backpacking trip through wilderness with no cell service. If the ex-wife is on foreign soil, she will have to go to the U.S. Embassy to have her signature notarized, which may not be her top priority. I’m telling you, these things happen.

If the previous loan on the property was a conventional bank loan, everything’s easy. If, on the other hand, the loan was carried by the seller 27 years ago, paid off 12 years ago, and the seller has since passed away without ever sending a reconveyance proving the loan is paid off and the title belongs to you, have fun tracking down the seller’s heirs for that reconveyance.

The moral of the story is this: communicate early and often with your escrow officer, and things should work out fine.

If you have questions about real estate, contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.