It’s not something you usually think much about when you list your home for sale, let alone when you get and accept an offer, but it happens a lot: The buyer backs out of the sale. Over the past year, we’ve seen quite a lot of buyer back-outs. A report published by Redfin on July 23, 2024, revealed that nearly 56,000 home-purchase agreements were canceled in June 2024. That equates to 14.9% of homes that went under contract that month, and the highest percentage of any June on record.
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If a buyer backs out of a home purchase, it’s not just a bummer for the seller, it’s possibly a set of financial problems. You may rouse suspicion among potential buyers by relisting your home after escrow fails to close. You’ll also lose time and, if you have a mortgage, have to keep paying that while your house sits on the market. Though you can’t control a buyer who thinks twice, you can be proactive by being informed. GOBankingRates spoke with two real estate agents to find out the five most common reasons buyers bail.
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The Appraisal Comes In Low
Alexander Kalla, realtor at Keller Williams Bay Area estates, said the most common reason for buyers to back out of a sale is because the appraisal comes in lower than the offer price.
“Buyers sometimes offer more than a home is worth, either from exhaustion of bidding wars or the fear of missing out,” Kalla said. “If the appraisal is lower than the agreed price, lenders won’t finance the full amount, and buyers may not have the cash to cover the gap.”
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The Buyer’s Financing Falls Through
Preapproval on a mortgage loan does not equal approval. A buyer needs to go through a complex underwriting process in order to get a final approval from a lender. It’s not uncommon for financing to fall through, resulting in a buyer backout.
“Even in the tech-driven, affluent Bay Area, buyers often rely on mortgage financing,” Kalla said. “If a buyer’s loan is denied due to a change in employment, a sudden dip in credit score or unanticipated credit card debt, the deal can collapse.”
Financing can fall through over seemingly insignificant issues.
“I have had a buyer’s financing being jeopardized because of using a Target credit card that he didn’t pay off for $400 and was not aware of it,” Kalla said. “This is especially prevalent in a high-cost market where even small financial hiccups can derail loan approval.”
A Bad Inspection
Most homebuyers get a home inspection done before closing escrow. A home inspector checks the condition of numerous parts of a home including the roof, walls, foundation, electrical systems and more. A poor inspection can easily lead to a buyer backing out.
“We represented a buyer last week who backed out after a poor inspection,” said Jeff Lichtenstein, CEO and broker at Echo Fine Properties. “The buyer wanted a credit of $22,000 for a new AC. The seller was only willing to give $15,000 which was a quote through a different company. The buyer decided to go out and look at something else — which they bought.”
A Bad Neighbor
Is your nextdoor neighbor someone who likes to blast loud music at home? Do they hoard junk on their front porch? Are they always in your business? A bad neighbor is a good reason for a buyer to back out.
“We had a deal earlier this year where two ladies wanted to back out after a neighbor with a definite opinion on a political person met them in the street,” Lichtenstein said.
Cold Feet or Overwhelm
Buying a house is an incredibly intense process. It’s not only a complete headache in regard to paperwork, but it’s also exhausting to be put through the ringer when going through the underwriting process to get final approval. Buyers sometimes back out because they get cold feet or feel overwhelmed.
“Some buyers second-guess their decision or feel buyer’s remorse the day after they get into contract, especially if they rushed the process or waived contingencies,” Kalla said.
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This article originally appeared on GOBankingRates.com: I’m a Real Estate Agent: The 5 Most Common Reasons Buyers Back Out of a Sale
