Can a Pending Sale Fall Through? Here’s How and Why

A “pending sale” means a seller has accepted a buyer’s offer, and the property is under contract. While this indicates commitment, the deal is not complete. Several factors can still cause the sale to fall through before closing.

Understanding Common Contingencies

Real estate contracts frequently include contingencies, conditions protecting both buyer and seller. These clauses allow a party to withdraw from the purchase agreement without financial penalty if certain conditions are not met. The financing contingency ensures buyers can secure a mortgage loan. If financing falls through due to changes in the buyer’s financial situation or a low property appraisal, the buyer can terminate the contract and receive their earnest money deposit back.

The inspection contingency allows buyers to conduct professional home inspections. If significant defects are discovered, such as structural issues or major system failures, the buyer can negotiate with the seller for repairs, a price reduction, or terminate the agreement. If the seller declines to address the issues, this contingency allows the buyer to withdraw without penalty. An appraisal contingency protects the buyer if the home’s appraised value is less than the purchase price, as lenders typically will not finance above the appraised value. A sale of existing home contingency protects buyers who need to sell their current property to finance the new purchase, making the new home conditional on their current home’s sale.

Additional Obstacles to Closing

Beyond contractual contingencies, other issues can derail a pending home sale. Title issues, problems with legal ownership or claims, are a significant concern. These can include undisclosed liens, boundary disputes, or errors in public records that cloud the property’s title. A thorough title search identifies these issues, which must be resolved before a clean transfer of ownership can occur.

Survey problems can emerge, revealing discrepancies in property lines, encroachments, or unrecorded easements. These findings can complicate the transaction and may require negotiation or legal action. Buyer or seller default, where one party fails to uphold contractual obligations, is another reason sales collapse. This could involve a buyer failing to submit required documents or a seller not completing agreed-upon repairs. Such breaches can lead to legal disputes and forfeiture of earnest money.

Buyer’s or seller’s remorse can lead a party to change their mind about the transaction. This can have significant contractual penalties if no valid contingency permits their withdrawal. Even after initial loan approval, lender issues can surface late in the process. Changes in the buyer’s financial status, such as a new job, job loss, or acquiring new debt, can cause a lender to re-evaluate or revoke loan approval. Underwriting changes or shifts in interest rates can also impact affordability, leading to financing falling through.

Navigating a Failed Sale

When a pending sale falls through, the earnest money deposit is a central consideration. The deposit is held in an escrow account. If the sale collapses due to the buyer exercising a valid contingency, such as a failed inspection or a low appraisal, the earnest money is typically returned to the buyer. However, if the buyer defaults on the contract without a contractual reason, or changes their mind outside contingency periods, the earnest money may be forfeited to the seller.

After a failed sale, both parties generally proceed with a formal contractual release, often requiring signed forms to absolve each other from the agreement. This ensures neither party can pursue further claims. For sellers, the property returns to the active market. For buyers, the home search restarts. While many cancellations are resolved amicably, disputes can arise, particularly concerning the earnest money deposit. Such disagreements may necessitate mediation, arbitration, or, in rare cases, litigation.