Common reasons why pending sales fall through

When you think you've found your perfect home, you will be understandably devastated if the sale falls through. After the seller has accepted your offer, it can take as long as 60 days to close or more, and many things could go wrong. You might be surprised at the number of reasons pending sales fall apart. According to an article in RIS Media, let's take a look at what are pending home sales.

What does pending mean?

The status of a home sale changes to pending when an offer has been accepted. While the property is listed as pending, the buyer and the seller have time to prepare for closing. There are likely contingencies in the contract that need to be met, and this closing period also allows both parties to get ready.

Contingencies are clauses that protect buyers and sellers during the transaction. A common contingency a buyer might include in the purchase agreement is a home inspection contingency. If the inspector finds serious issues, the buyer can back out, keeping their earnest money deposit. Homes are usually in contingent status and then move to pending when the contingencies have been satisfied.

Reasons why a pending sale might fall through

Many things can cause a pending sale to collapse, some of these issues can be fixed to turn the situation around, but others will be fatal to the real estate transaction. Let's take a look:

  • Extensive damage
  • While the property might look perfect, the home inspector's report could reveal some alarming problems. It could be the case that the home has structural issues that will be very expensive to remedy. The seller may refuse to cover the cost of this repair work, leaving the buyer with little option other than two back out.

  • Financing problems
  • Even if a buyer is preapproved for the loan they need to buy the home, things can go wrong before the funds are provided.

    If the buyer takes out a new loan before final approval for their mortgage, their debt-to-income ratio might have changed, altering the amount of money the lender is willing to lend.

  • Title issues
  • The title needs to be clean for a lender to approve the mortgage. A title company can research the records checking for judgments, liens, and other ownership claims on the property. If anything is found, the seller must deal with it to prevent the sale from falling apart.

  • A low appraisal
  • An appraisal occurs so the lender knows they are not providing more money than the home is worth.

    If the appraiser concludes that the home is worth less than the amount offered to buy it, the deal could be off. It's referred to as an appraisal gap. Buyers can back out when there is an appraisal contingency.

  • The Buyer's home doesn't sell
  • If the buyer needs to sell their existing home to fund the next purchase, they might add a home sale contingency that gives them up to 60 days to sell.

    They can back out of the purchase if they cannot sell their home in this timeframe. Though this makes a lot of sense for the buyer, the seller isn't happy to wait and then have to look for another buyer. It is why some buyers will put in an offer on a contingent sale when it's due to a home sale clause.

  • Errors in the paperwork
  • A real estate transaction is complicated, and mistakes can be made, but even a tiny error can delay the sale. Though this might only slightly push back the closing date, it can stop the transaction completely.

  • Being unable to insure the property
  • If a previous owner has made a significant claim for repairs on the property, like flooding or a fire, it might be difficult to find an insurance company to insure the home. They will see the previous claim and could deem it too risky, and without insurance, there won't be a mortgage.

  • The buyer or the seller changes their mind
  • While many possible contingencies could lead to the pending sale falling through, the buyer or the seller might decide they don't want to continue anyway. Perhaps their situation has changed, or they don't want to buy or sell the property anymore.

    If the buyer does this without a contingency, they will lose their earnest money deposit. If the seller backs out, the buyer could claim damages from them.

  • Final thoughts
  • When buying or selling a home, you want to avoid your pending sale falling through. While many things will be out of your control, some could be your responsibility. You should do everything possible to ensure your part of the real estate transaction goes smoothly, helping the pending sale get to closing.