Do Pending Houses Ever Fall Through?

The “pending” stage in real estate begins when a seller accepts a buyer’s offer. This signifies both parties are moving forward with the sale, often working through various conditions before the final transfer of ownership. While many anticipate a smooth progression to closing, circumstances can arise that prevent the sale from concluding.

Frequency of Deals Falling Through

While most real estate transactions close successfully, a notable percentage of pending home sales do not. Recent data indicates that approximately 5% to 7% of home purchase agreements are canceled before closing. For instance, in May 2025, roughly 6% of pending sales were canceled, an increase from 5% a year prior. In some market conditions, this rate can be higher, with some analyses showing nearly 15% of pending sales falling through in certain months. This means that for every 100 homes that go under contract, several will return to the market, highlighting that a pending status does not guarantee a completed sale.

Common Reasons for Collapse

Many factors can cause a pending home sale to collapse, often due to issues discovered after the initial offer. A frequent cause is buyer financing. Even with pre-approval, a loan can fall through if the buyer’s financial situation changes, such as job loss or new debt. Any significant shift in their financial profile can lead to loan denial, halting the transaction.

Discoveries during the home inspection are another common reason for collapse. Buyers typically conduct a detailed inspection to uncover any defects, from minor repairs to significant structural issues, roof damage, or problems with electrical or plumbing systems. If substantial problems are found, and the buyer and seller cannot agree on repairs, credits, or a price reduction, the buyer may choose to withdraw from the contract. This negotiation phase often unravels deals.

Appraisal issues also frequently derail sales, especially if the home’s appraised value is less than the agreed-upon price. Lenders only finance up to the appraised value. If an appraisal is low, the buyer must cover the difference, the seller must reduce the price, or the deal may collapse. This occurs in competitive markets where bidding wars inflate prices.

Title issues are another risk, including undisclosed liens, boundary disputes, or unrecorded easements that prevent clear ownership transfer. If a title search reveals such issues and they cannot be resolved, the sale cannot proceed.

Sometimes, a buyer may experience remorse or change their mind. Though less common after contract execution, buyers might decide not to proceed with the purchase, potentially forfeiting their earnest money deposit. This can happen if they find a more suitable property or become nervous about the financial commitment. Seller issues, though rare, can also cause a deal to fall through, such as a seller being unable to find a new home or facing an unforeseen personal emergency.

Understanding Contingencies

Contingencies are specific conditions written into a real estate contract that must be met for the agreement to become legally binding. These clauses protect buyers and, in some cases, sellers, allowing them to withdraw from the contract without severe penalty if certain conditions are not satisfied. When a contingency is not met, the party protected by that contingency has the right to terminate the agreement and often receive their earnest money deposit back.

Common contingencies include:
Financing contingency: A common contractual protection, this allows the buyer a specified period, often 17 to 21 days, to secure a mortgage loan. If the buyer is unable to obtain the necessary financing within this timeframe, this contingency permits them to cancel the purchase agreement. This protects buyers from being obligated to purchase a home they cannot afford due to loan denial.
Inspection contingency: The inspection contingency provides the buyer an opportunity to have the property professionally inspected for any defects or issues. If the inspection report reveals significant problems that the buyer finds unacceptable, and negotiations for repairs or a price adjustment fail, this contingency allows the buyer to back out of the deal. It ensures buyers are not unknowingly purchasing a property with costly hidden issues.
Appraisal contingency: An appraisal contingency safeguards the buyer if the home’s appraised value comes in below the agreed-upon purchase price. Since lenders base loan amounts on the appraised value, this contingency allows the buyer to renegotiate the price with the seller or terminate the contract if the seller is unwilling to reduce it. This prevents buyers from paying more for a property than it is objectively worth according to a professional appraisal.
Sale of current home contingency: Finally, a sale of current home contingency makes the buyer’s purchase conditional on the successful sale of their existing property. This provides security for buyers who need the proceeds from their current home to finance their new purchase. If their existing home does not sell within a predetermined period, this contingency allows them to withdraw from the new purchase agreement without forfeiting their earnest money.

What Happens When a Deal Collapses

When a pending home sale collapses, the practical outcomes vary for both the buyer and the seller, largely depending on the reasons for the termination and the terms of the signed contract. For the buyer, the primary financial concern is typically the earnest money deposit, a good-faith payment made at the time of offer acceptance, usually held in an escrow account. If the deal falls through due to a valid reason covered by a contingency, such as a failed inspection or inability to secure financing, the buyer is generally entitled to a full refund of their earnest money. However, if the buyer backs out without a contractual right to do so, or after contingency periods have expired, they may forfeit the earnest money to the seller. Following a collapse, the buyer must then restart their home search.

For the seller, a collapsed deal means the property returns to the market, often appearing with a “Back on Market” or “Active” status. This can sometimes raise questions among new potential buyers. Sellers must re-engage their real estate agents to relist the home, update marketing materials, and potentially adjust their pricing strategy or address any issues that caused the previous deal to fail.

The process of waiting for a new buyer can lead to additional carrying costs, such as mortgage payments, utilities, and insurance. Real estate agents play a crucial role in facilitating communication between parties during a collapse, helping to navigate the contractual obligations and guide both buyers and sellers through the next steps, aiming to minimize financial fallout and expedite a new transaction.