Can a Pending House Sale Fall Through?

A pending house sale often brings a sense of anticipation for both buyers and sellers, yet this status does not guarantee a completed transaction. A property listed as “pending” indicates that an offer has been accepted, and a contract is in place. However, the finalization of the sale depends on numerous conditions and contingencies outlined within the purchase agreement. Understanding factors that can cause a sale to falter helps manage expectations and navigate real estate transactions.

Buyer’s Financing Difficulties

A common reason for a pending sale to fall through involves the buyer’s ability to secure or maintain their financing. While pre-approval is common, it does not guarantee final loan commitment. Lenders re-verify financial information, credit history, and employment stability. A change in the buyer’s employment, an increase in their debt-to-income ratio, or a sudden drop in their credit score during this period can lead to loan denial.

Even if initial qualifications are met, changes in interest rates or lender requirements can impact the loan amount for which a buyer qualifies. If interest rates rise significantly, the buyer’s monthly payment could exceed their affordability, or they may no longer meet debt-to-income ratio guidelines. Should the buyer fail to secure the necessary funds by the financing contingency deadline, the contract may be terminated. This situation often leaves the seller needing to re-list the property, prolonging the sales process.

Property Inspection Findings

Property inspections represent another significant hurdle that can cause a pending sale to collapse. Most purchase agreements include an inspection contingency, allowing the buyer 7 to 14 days to assess the property’s condition. Home inspections aim to uncover issues, from minor repairs to major structural deficiencies. Discoveries such as significant foundation problems, extensive water damage, outdated electrical systems, or major HVAC malfunctions can become deal-breakers.

If the inspection reveals substantial defects, the buyer typically has several options, including requesting repairs, asking for a credit at closing, or renegotiating the purchase price. If the seller is unwilling to address concerns or issues are overwhelming, the buyer may terminate the contract within the inspection contingency period. This process requires careful negotiation between both parties, as an inability to agree on remedies can lead to the sale falling apart.

Appraisal Discrepancies

An appraisal discrepancy can also jeopardize a pending home sale, particularly when the property’s appraised value falls below the agreed-upon purchase price. An appraisal is an unbiased valuation of the property’s market value, conducted for the lender to ensure the loan amount does not exceed its worth. Lenders generally will not finance more than the appraised value of the home, regardless of the contract price. This creates an “appraisal gap” if the appraisal comes in lower than the sales price.

When an appraisal gap occurs, the buyer is responsible for covering the difference between the appraised value and the purchase price, often out-of-pocket, as the lender will not provide additional financing. Alternatively, the seller may agree to reduce the purchase price to match the appraised value. If the buyer and seller cannot agree on how to bridge this gap, and an appraisal contingency is in place, the buyer may withdraw from the purchase agreement without penalty.

Title and Legal Hurdles

Issues related to the property’s legal ownership or history can also derail a pending sale. Before a property can be legally transferred, a title search is conducted to ensure the seller has clear ownership and the right to sell the property. This search aims to uncover “clouds” on the title, which are defects or encumbrances affecting ownership. Common title issues include undisclosed liens, such as unpaid property taxes, mechanics’ liens from contractors, or judgment liens.

Other title problems can involve easements, which grant specific rights to another party over a portion of the property, or boundary disputes with neighboring properties. If the seller inherited the property, probate issues or challenges to the will could also delay or prevent a clear transfer of ownership. These legal hurdles must be resolved before closing, often requiring legal action or negotiation to clear the title. If these issues cannot be rectified timely, the buyer may choose to terminate the contract, as a clear title is a fundamental requirement for most real estate transactions.

Failure to Meet Contractual Deadlines

Real estate contracts are inherently time-sensitive documents, and the failure of either party to meet specified deadlines can cause a pending sale to collapse. Purchase agreements include numerous contingencies, each with a defined timeframe for completion. These may include deadlines for securing financing, completing property inspections, reviewing homeowner association documents, or obtaining a satisfactory appraisal. Missing any of these crucial dates can provide grounds for the other party to terminate the contract.

For example, if a buyer fails to submit their loan application documents by the stipulated date, or if a seller does not provide requested repair receipts within the agreed-upon period, the contract may become voidable. The closing date itself is a firm deadline, and delays in obtaining necessary documents, coordinating funds, or resolving last-minute issues can push past this date. While extensions can sometimes be negotiated, repeated delays or an unwillingness to cooperate by one party can lead to the termination of the agreement, often resulting in the forfeiture of earnest money or potential legal disputes.