How Often Do Buyers Back Out at Closing?
Gain insight into how often real estate buyers withdraw at closing and the key factors influencing these crucial moments.
Real estate transactions often involve the possibility of a buyer withdrawing from the agreement. “Backing out at closing” refers to a buyer’s decision to terminate a purchase agreement when the transaction is nearing completion. This late-stage withdrawal can create disruption and financial implications for all parties involved.
How Frequently Buyers Back Out
While most real estate transactions close successfully, a notable percentage do not. Redfin reported that approximately 15.3% of U.S. home-purchase agreements were canceled in July 2025, rising to 15.7% in August. This marked the highest July rate since 2017.
The frequency of deals falling through fluctuates based on broader market conditions. Factors like rising interest rates, economic uncertainty, and shifts between buyer’s and seller’s markets influence these numbers. For example, a market with more available inventory may give buyers greater leverage. While deals can unravel at any point, the percentage specifically at or very close to closing may be lower than those that fail during earlier contingencies like inspection or appraisal.
Key Reasons for Buyers Backing Out at Closing
Several common issues can lead a buyer to withdraw from a purchase agreement as the closing date approaches. These reasons often become apparent in the later stages of the transaction.
Financing issues frequently cause deals to collapse at the last minute. Even with a pre-approval, final mortgage approval can fall through due to changes in the buyer’s financial situation, such as a job loss or new credit lines. Lenders conduct a final review of the buyer’s credit score, income, and debt-to-income ratio, and any adverse changes can derail loan approval. Additionally, if the home appraisal comes in lower than the agreed-upon purchase price, the buyer may not be able to secure full financing.
Problems with the property’s title or undisclosed liens can also cause a buyer to back out. A title search may reveal issues such as unpaid property taxes, outstanding liens from contractors, or unresolved easements. Errors in public records, boundary disputes, or the discovery of missing heirs can obscure true ownership and prevent a clear transfer of title. These defects must be resolved before the sale can proceed, and if they cannot be cleared in a timely manner, the buyer may terminate the contract.
Issues arising during the final walk-through can prompt a buyer’s withdrawal. This inspection, conducted within days or hours of closing, allows the buyer to confirm the property is in the agreed-upon condition. If significant damage is discovered, agreed-upon repairs have not been completed, or the property is not left in the expected “broom-swept” condition, the buyer may refuse to close. Such findings can indicate a breach of the purchase agreement terms.
Contingencies outlined in the purchase agreement, if not met, provide a contractual basis for a buyer to withdraw. For instance, an offer might be contingent on the sale of the buyer’s current home, and if that sale fails, the buyer may be unable to complete the purchase. Some buyers experience “cold feet” or encounter unexpected personal circumstances that make them unwilling or unable to proceed. This change of heart can lead to termination if no other issues are present.
Consequences of a Buyer Backing Out
When a buyer backs out of a real estate contract at closing, the immediate implications center on the earnest money deposit and the status of the purchase agreement. The earnest money, held in an escrow account, serves as a good-faith deposit demonstrating the buyer’s commitment. Its fate depends directly on the contract terms and the reason for the buyer’s withdrawal.
If the buyer backs out for a reason allowed by a valid contingency clause—such as a failed home inspection, an appraisal below the purchase price, or an inability to secure financing—the earnest money is typically returned to the buyer. However, if the buyer withdraws without a valid contractual reason, they risk forfeiting the earnest money deposit to the seller. Both the buyer and seller must mutually agree to release these funds from escrow.
Upon a buyer’s withdrawal, the purchase agreement typically becomes void or terminated. For the seller, this means the property returns to the market, necessitating a new listing and potentially delaying their plans. Sellers may also incur additional carrying costs, such as real estate taxes and utility payments, during the extended marketing period. While retaining the earnest money deposit is the most common recourse, contracts may allow for other legal actions, such as pursuing damages or seeking specific performance.