Reasons a Pending Sale Might Fall Through

What does it mean when the "pending" sign is placed on the for sale sign or a home's online listing? In the best case scenario, it is simply an indication that the seller has accepted a buyer's offer and the escrow process has begun; the sale is not yet complete because the inspection, appraisal, financing paperwork, and any negotiations that come as a result of them are still being finalized in preparation for closing. 

In some cases, a house will fall out of escrow during this pending period, and the process will have to begin all over again with a new buyer. 

Wondering what can cause a pending sale to fall through? Keep reading to find out. 

Problems with the Buyer's Financing

One of the most dynamic and essential processes taking place during the escrow period is the final approval for the buyer's mortgage. If anything changes with the buyer's financial situation that causes them to lose their approval, the sale will most likely fall through. 

In nearly all situations like this, the buyer's will have a bit of time to explore other financing solutions and may find another way to secure a mortgage. However, in some cases this will mean the pending sale falls through and the home returns to the market. 

Major Problems are Revealed During the Inspection

A home inspection involves a licensed, professional home inspector doing a thorough review of the condition of the property. In some cases, the inspection report will reveal a major problem that requires repair or something that needs to be replaced immediately. If the condition of the home is not something the buyer is willing to accept, they are legally allowed to walk away from the sale.

In many cases, the buyer will negotiate to have the issue resolved rather than completely leaving the property, but there are some cases in which the buyer is not interested in the property based on the inspection report. 

The Home Appraises for Less than the Accepted Offer

During the escrow process, a professional appraisal will be conducted to determine the value of the home. If the appraised value comes back lower than the sale price, the sale may fall through. 

A lender will not offer a mortgage for a home that is worth less than the buyer owes, so the buyer will either need to put more money down or pay a lower price in order to move forward with the sale. 

Complications with a Contingent Sale

As the market shifts back to being more balanced, in contrast to the seller's market we have seen in recent years, contingent offers are being accepted again. A contingent offer is one in which the buyer's mortgage approval is contingent on their current home selling. 

In other words, the buyer will only be approved for the mortgage required to go through with the pending sale if the home they currently have on the market sells for the right price in the right timeline. 

Property Liens or Title Issues

Another element of the escrow process is an exploration of the any leins or title issues that may be relevant to the home. A title company will be hired by the mortgage lender to conduct research on the home, and any issues that arise may prevent the sale from going through. 

In some rare cases, there may be other reasons a contract will fall through, but these categories cover the vast majority of situations. Want to learn more about buying or selling your home? We are here to help. Contact us any time.