Why do some transactions fall out of escrow? Here are the three most common reasons a transaction doesn’t work out:

1. The buyer moves too quickly. Sometimes buyers are a bit impulsive and submit an offer that is above their comfort zone, the offer gets accepted, and then a few days later they realize they bit off more than they could chew. There are a few things the selling side can ask ahead of time to ensure we’ve chosen a buyer who can actually get to the finish line: What’s their motivation to move here? Have they submitted offers on any other homes? Have they backed out of any previous escrows? You want a buyer who can fulfill their part of the deal.

“Sometimes buyers are a bit impulsive and submit an offer that is above their comfort zone.”

2. Appraisal. Sometimes an appraisal will come in below the contracted price. For example, if you’re in escrow at $500,000, but the appraisal comes in at $475,000, how do you make up the difference? In this case, one of three things frequently happens: 1) The buyer will choose to pay the difference; 2) the seller agrees to lower the purchase price to the appraised value; or 3) the buyer and seller meet in the middle. Unfortunately, if none of those options pan out, the property falls out of escrow. 

3. Inspection. This is the most common reason why transactions fall out of escrow. When a buyer gets their offer accepted, they’ll do an inspection of the property, and sometimes things are found that they’re not comfortable with, and they’ll back out of the deal. However, often they’ll write up a request for repairs for the things they want to be fixed. The seller can choose to repair all of them, none of them, or some of them. Sometimes the buyer and seller can’t come to an agreement, in which case, the transaction falls out of escrow.

If you have more questions about why people back out of escrows, or real estate in general, reach out via phone or email. I would love to speak with you.