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Escrow companies having hidden cancellation fees

real estate traps from escrow to watch out forWe tell our clients, if you want to cancel the transaction, then cancel it. If our clients have full disclosure and don’t want to buy the home, then they should not be forced to.

The way that I see it, as long as we have the client, we have everything.

But, make a client mad, force them to do something they don’t want, or trick them into buying something they don’t want, you have just made a enemy for life.

Those types of enemies will go out of their way to tell the entire world how horrible you are. How deceitful. How manipulative. How low down and dirty…  You get the picture.

We operate our real estate business so our clients know the rules. There are certain times where a client can cancel the transaction and have their deposit refunded in full. There is a particular time if they cancel the seller gets to retain their deposit, in full and possibly, damages.

The seller has certain cancellation rights. If a home seller changes their mind during a transaction and chooses not to sell, they can if they have the buyers blessing.

When home buyers and home sellers cancel a real estate transaction, real estate agents and real estate lenders do not get paid.

The way it “used to work” is that escrow companies did not get paid either if escrow was cancelled and the buyer/seller decided not to buy/sell the home. The escrow company refunded the buyers deposit in total back to the home buyer. The escrow company did this in good faith hoping to recoup any lost monies, from work completed, when the home enters escrow again.

How is that for awesome.  Maybe it can be said that is the way it should be. Focusing on the client, their wants, needs and desires keep the agents in business.

Could it be that this way of doing business could benefit escrow in some sort of “karma-cosmic” way?

Read the small print!

However, what you should know is that sometimes Escrow has a buyer sign paperwork that will allow the escrow company to keep part of the buyer’s deposit for services rendered if the transaction is cancelled.

Sometimes real estate buyers don’t read all of the escrow paperwork as well as they should. They sign the document, then something happens that makes them want to back out of the home purchase. They think they are going to be getting their deposit back and when they get the check it’s missing several hundred dollars.

Be a proactive home buyer – ask questions!

Protect yourself. Ask your agent if the “escrow company” being used conducts their business in this manner. If your agent does not know, Then fire off an email to the escrow officer asking them if they retain part of your deposit if you cancel the transaction due to circumstances within or outside of your control.

What if a home buyer loses their job and cannot move forward with the home purchase?

What if someone on the buyers end is diagnosed with a terminal illness?

Understand that most buyers don’t cancel the real estate transaction just for fun. There is usually a very good and sometimes painful reason for their cancellation.

To add insult to injury, now the escrow company is going to jam it to them and retain some of their deposit for “services rendered”, instead of chalking it up to being “good will”?

Read all paperwork carefully that you get sent from escrow. Sometimes escrow will send you paperwork without your agent’s knowledge. Ask your real estate agent if they have some sort of standard review process.

We have our clients meet with an escrow officer we use, even if she if not the escrow officer/company being used as part of the home purchase. We trust her and she goes over all of the collected buyer escrow paperwork as a favor to Paris and I and our Paris911/SCVnest real estate team.

We tell our home buyers to collect all the paperwork and at a particular time within escrow, we have them set the “covering/signing” appointment with our escrow officer. It works and keeps our clients safe.

If you are an escrow company, at least be upfront with the buyer. When you make your introduction as the escrow company the seller has chosen, let the home buyer(s) know if they cancel the transaction you will be retaining part of their deposit for services rendered. That will keep the transparency where it needs to be and the buyers informed. I hate surprises as do most homebuyers and sellers.

I’m Connor with HONOR with REMAX of Santa Clarita. Please reach out to me when you are ready for our help with your buying or selling of real estate. Also, tell a friend.

If you want to listen to our real estate of Santa Clarita radio show, please enjoy our latest broadcast at HousingRadio.com – it will serve you well.

For all things Santa Clarita real estate please read our Santa Clarita real estate blog!

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Connor MacIvor

Top REMAX Realtors in the Santa Clarita - Valencia and Greater Los Angeles areas. Local Real estate agents specializing in buyer and seller consultation and representation.

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