Canceling a Transaction

A few times in the past couple months I’ve struck a deal with the seller, but we’ve had to cancel escrow. In this market, when acting fast is part of the game, it’s often impossible to do all your due diligence before making an offer. If the listing agent won’t allow interior inspections before escrow, we try to arrange a preliminary interior inspection the day escrow opens so that if there’s something obviously wrong with the property, we can cancel before the earnest money deposit (EMD – usually 3% of contract price) is due. On one of these deals, we had to inspect after we sent the EMD, but since a physical inspection contingency was part of the contract, we got the EMD back no problem.

Canceling escrow is one of the most emotionally draining parts of my job. In this seller’s market, striking a deal is already tricky enough. That’s why I encourage my buyers to do all of the due diligence they can before we offer, especially:

  • drive by the property
  • understand the neighborhood
  • check ownership history
  • check comparables

This way, we limit the surprises once we enter escrow. If you plan to develop a good reputation in this business, it’s important to have good reasons to cancel escrow. But it’s good to know the option is always there.


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