How Can Mediation Help Resolve Issues During Escrow?

 Posted on August 13,2024 in Mediation

Some real estate transactions are smoother than others. Even when everything seems assured, there are often unexpected issues that arise. Many times, these complications pop up during escrow. In escrow, a third party holds property or funds until the sale is complete and/or certain conditions are met. By the time parties reach the escrow stage, they usually have already signed a purchase agreement containing the terms of the transaction.

A real estate deal can hit significant obstacles, which this article will discuss. We will also explore how mediation can help resolve some of these complications and why a California real estate mediation attorney is an excellent resource for settling real estate disputes.

What Kinds of Issues Arise During Escrow?

There are many moving parts to a real estate transaction, which provides many opportunities for hurdles to present themselves. Issues that commonly arise during escrow may be related to the seller, the buyer, the property, or documentation. For example:

• Title issues: Complications often come up that are related to the title, or the property’s ownership. When a title search is performed, it can sometimes reveal that liens have been placed on the property, which means the property owner owes debts against the estate. This can pose a problem for the prospective owner, who could lose the property over those debts.
• Damage: Before a real estate transaction is completed, an inspector is hired to look for any problems with the house itself. Some of these problems can be serious, like asbestos or termite damage, and the buyer may demand the seller fix those issues before escrow closes.
• Loan disqualification: Once they reach the escrow stage, some buyers may feel the sale is guaranteed. They might then make large purchases, like a new car, which can disqualify them for a loan to buy the property. This is because mortgage loans are calculated on a debt-to-income ratio to ensure the borrower has enough money to pay back the mortgage. If the borrower makes large purchases and takes on more debt, the debt-to-income ratio will change, and he or she may no longer qualify for the loan.

How Can Mediation Help Resolve Such Issues?

Mediation is a form of alternative dispute resolution, which means it allows opposing parties to resolve their issues outside of court. It is known to be very effective, so many contracts contain clauses requiring the parties to first attend mediation if a dispute arises. Some real estate purchase agreements contain such a clause as well.

There are many benefits to mediation, which is usually more cost-effective and less time-consuming than litigation. One of its greatest advantages, however, is that the parties have more control over the process and the outcome. They can be creative with the solution and tailor a settlement to suit their specific needs. In a real estate dispute, the fact that there are so many components can actually make it easier for the mediator — the neutral third party who facilitates the mediation — to find a compromise suitable for both parties.

Contact a Los Angeles, CA Real Estate Mediation Attorney

Except in certain cases, mediation is a great first place to start if there is a dispute about a real estate transaction. At Law Office of David Schechet, we offer excellent mediation services that have proven effective for many clients. We have over 35 years of experience in practicing law, and we aim to save our clients money by settling disputes as early as possible. Call 800-282-4731 to schedule a free consultation with a Los Angeles County, CA real estate dispute mediation lawyer.