How to Withdraw From Escrow

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Withdrawing from escrow is a very specific process. Withdraw from escrow with help from a real estate and mortgage professional in this free video clip.

Part of the Video Series: Finance Tips
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Video Transcript

Hello, this is Sidney Potter in Pasadena, California with Potter Equities. I thank you for your time. I've been asked to comment on how to withdraw from escrow. That's a fairly important element there. It's almost like walking through raindrops, walking through minefields. It can be fairly treacherous and it's very particular because there's a potentiality that you may lose your money. So please listen up I think I've got a few insights to possibly prevent a situation where you actually lose your money because getting your money back is actually pretty critically important. First and foremost, what type of methodology do you employ and the way in which you engage what I call preventive medicine in making certain that you get your money back or that you withdraw your deposit from escrow is all about the contract contingencies. Contract contingencies are what you map out before you get to escrow and that way you're able to solve problems and put these forest fires before they actually occur. Element number one, in terms of finance and contingencies, make an interest contingency, meaning that if you anticipate you can qualify for a 4.5 percent interest rate, state that actually in your contract. That way in the event that you're closing on your piece of property four months later and your 4.5 percent has suddenly become 4 and 9/8s, 5.5, 5 and 1/4 and it's more expensive for you to acquire the property, you can certainly get your money back in escrow by claiming that listen, I didn't meet the finance contingency on the interest rate, therefore, I can withdraw from escrow. Similarly in terms of a finance contingency and this is item number two, tie it down to the down payments, what we call the LTV, the loan to value. If you're willing to do 3.5 percent down which is standard FHA financing on the purchase of a home, you put that language in the contract and find out low and behold, unfortunately you don't qualify. Not only do you not qualify for a FHA loan, but you go conventional and they require 5 to 10 percent down, it's certainly more than what you wanted to put down, you certainly have no interest in acquiring the property, that would be grounds to nullify the contract and as a result withdraw your money from escrow. Item number two, select the escrow in which you do business with. Now this is all predicated upon jurisdictional locality, some jurisdictions let the seller have the caveat or at least the customary choice of escrow, some jurisdictions, locations give that entitlement to the borrower. If you want to control the situation, go with an escrow friendly location that you have a pre-existing relationship or it's been certainly recommended to you. It's what I certainly always do and what I tell my clients. Also, in terms of the contrast, make it contingent upon having both signatures of both the buyer and the seller in order to release the funds. You don't want to get a Monday morning surprise where you've seen and you've been notified by the escrow that the seller has taken your pass through deposit without your signature so make certain that that's codified within the purchase and sell escrow agreement. Another item here, if you want to get out of escrow, and you're a bit itchy, you don't want to close on the piece of property and you are the seller you can always option to have what they call a termination fee in there. A termination fee is simply the option to pay a pre-stated amount in which to well disgorge yourself from the contract. Your circumstances may have changed where it doesn't make sense to sell the property and/or to buy the property and the other property is able to gain by the termination fee. It's an arbitrary amount, it's what the parties are willing to agree upon. Now, if you're at your last straw right here and you've gone through all the contingencies and you're still in contract, you say to yourself you certainly don't want to buy the piece of property, what I would recommend and if you're the buyer on the piece of property is point to extenuating circumstances. Let's say you've passed off on the finance, the extenuating circumstances would be that you didn't get the job transfer you wanted, therefore it doesn't make sense to buy the home, therefore, you'd like your money back. You've had a situation where your home hasn't been finished. It's a new construction home, you'd like to extend escrow or you'd like your money back or you are unable to close let's say on the ideal loan. These are extenuating circumstances, could be a family death, it's what you call a story loan. You want to serve that up to the opposing party and by the good graces perhaps you'll get the monies back and you'll be able to withdraw from escrow without litigation and lastly if you're in a situation where the seller doesn't want to terminate escrow and you feel that they've caused a material delay, I would quite frankly insist upon litigation by following a less penance against the piece of property which ties it up in escrow. I certainly don't motivate or encourage escrow but when things do get kind of ugly that's certainly an option. Well with that said I certainly hope it never happens to you. My name is Sidney Potter out here in Pasadena, California with Potter Equities. I thank you for your time once again and I'll see you at the finish line. Thanks a lot.


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