As you certainly know, our local real estate market is extremely strong, efficient and competitive. You will very likely run into multiple offer situations where you will need every advantage you can muster. The most obvious advantage you can gain over other bidders is price but there is a lot you can do to increase your odds of success without the brute force of money. One of the most effective things you can do is offer sellers a two week escrow. An increasing number of lenders are willing to commit to closing escrow two weeks or less! If your current lender is unable to make such a promise then I suggest you search for a new lender.
My suggestion is to ask your loan agent something like this: “what is the absolute shortest escrow you can commit to if we get underwriting approval before we write an offer?” If he or she says “we really need 30 days” or “I feel much more comfortable with 30 days” or “we cannot provide you with underwriting approval until you have an accepted offer” then ask him or her two questions:
- If the deal depended on it, if you absolutely had to go faster, how fast could you go and commit to?
- How quickly can you get an appraiser out to the home after our offer is accepted and can you commit to that timeline?
If your lender is unwilling to commit to approximately two weeks for the escrow and three days for the appraiser then I encourage you to find someone who is willing to commit to these levels of performance.
The most common source of delays come from the appraiser. Some loan agents will get the appraiser out to the home the same day you sign the contract. Some loan agents will take as long as two weeks to get an appraiser out to the home. Delays are more common with out of the area loan agents as they are unfamiliar with the pressure cooker we live in.
The reason I place so much emphasis on short escrows is because listing agents are very biased towards them. Here are some reasons why:
- The simple and obvious answer is that they get paid sooner but this is not the most important reason.
- Longer escrows are generally more problematic. It affords the buyer more time to think, find problems etc. – sellers and listing agents don’t like that.
- Buyers offering a two week close of escrow are generally very confident, well-prepared and more experienced and thus more likely to provide the listing agent with a short, hassle-free escrow. Well-prepared buyers are more likely to have already received underwriting approval from the lender and are truly ready to go.
- Short escrows are all in all simpler for everyone.
I don’t how many times you have gone through the vicious cycle of researching homes online, visiting open houses, finding a home you like, researching the comps, talking to your agent about the home and asking him or her to run the comps and get disclosures, review and sign all disclosures, prepare and present an aggressive offer then not even get a counter offer, only to start the process all over again. It is not a pleasant process! My reason for belaboring this point is you may feel obligated to your current lender because he or she is a friend, relative or perhaps you have used them in the past. Whatever your rationale is, it should take a back seat to your success in the bidding wars to come. Save yourself the grief of writing lots of offers. This is not the time for friendships, favors or “feeling obligated”. These multiple offer situations are brutally competitive so you too need to be brutally competitive. There is no room for a slow lender in a multiple offer situation. You need a lender who can make it easier to get your offer accepted and eliminate delay-based drama during your escrow.
If your loan agent does not perform on time and you are forced to extend escrow you might run into a surly listing agent who makes the process difficult and stressful. You should place some value on avoiding a stressful situation like this.
The last point I would like to make is that you might think you are saving money by going with one lender versus another but if that lender does not perform on time and you are forced to extend escrow, it will cost you $100 – $200 per day for the first 3-4 days and the price goes up from there. Some agents have great backup offers in place and have no desire to let you delay the close of escrow so it is not wise to assume long delays will be tolerated.
If you would like to talk to a loan person who will commit to a 14 day close please let me know. I have a great referral at Wells Fargo and one at BofA.
