So, what should you do if your contract falls out of escrow?
Don’t cry over spilled milk – instead, go milk another cow! It’s a scenario no seller wants to be in; you’re just days from closing and your contract falls out of escrow. All the hard work you’ve put into cleaning, staging, selling, and packing your home crumbles in an instant. Panic sets in. Will your house ever sell?
Don’t agonize over your luck just yet. While the stress of a canceled sale can be aggravating, it’s not uncommon for a deal to fall through.
Just try to remember, milk spills – but there’s plenty more where that came from.
Why do contracts fall out of escrow?
The home inspection reveals problems
Whether these issues are serious or just minor annoyances, buyers are picky these days thanks to a slew of HGTV shows about finding the perfect house. The buyer has a few options in this instance:
- Ask the seller to fix the items
- Accept the property as-is
- Back out of the contract
Sometimes buyers are just looking for a way to withdraw from a deal, and an unwanted repair is one way to exit fairly easily.
The buyer cannot obtain financing
If a buyer, in good faith, has attempted to obtain the proper financing but is unable to obtain loan approval by close of escrow, the contract can be canceled. This can obviously be very frustrating for the seller if the contract is terminated near the COE date.
The buyer is unable to sell their home
In many cases, a buyer is counting on the sale of their own residence to purchase yours. If the house does not sell or is taking too long to sell, the deal will most likely fail. Contingency offers like this have a much higher chance of falling through due to circumstances beyond control.
The bank appraisal is low
Before a bank issues a mortgage, the property must be appraised. If for some reason the appraisal comes back much lower than the purchase price, it can be a deal-breaker if you and the buyer can’t negotiate the terms.
Problems with closing documents
During the closing process, a number of documents are reviewed. Unfortunately during this stage issues can come up with the title of the property such as outstanding liens, mistakes in public records, bankruptcies, etc. A problem with the title can entirely derail a deal.
Depending on the law, buyers typically have an allotted period of time that they can back out of a contract. Buyer’s remorse is very real, and can send your house back to the MLS in the blink of an eye.
What can you do if your contract falls out of escrow?
First of all, don’t panic! It’s never fun to deal with a lost contract but just realize that it happens more frequently than most people realize. In some markets, another buyer may be ready to extend an offer right away and in other cases, you may need to adjust your selling strategy.
Fix inspection issues
If something major came up during an inspection that chased your previous buyers away, you may want to consider fixing it to avoid the same problem potentially happening again.
Reconsider your asking price
Did an earlier appraisal come back lower than expected? Did the buyers feel the price was too high before backing out? Work with your agent to make sure the value of your home is competitive and comparable to similar properties in the area.
Last but not least, be patient! If your buyer fell through, it wasn’t meant to be. There is a right buyer out there for every property, whether it’s a home that needs fixing up or it’s only a few years old. Stay in close contact with your real estate agent as you come up with a game plan to get your house back on the market and sold.