Reasons a Pending Sale Might Fall Through
After an offer has been accepted, the home is labeled as "pending" and the escrow process begins. Want to learn more about this process and why pending sales sometimes fall through? Keep reading to find out why some pending sales fall through and how to avoid common issues with a pending sale.
What is a pending sale?
When you look at online real estate listings, you will sometimes see them labeled as "pending." This means the seller has accepted an offer and is under contract to sell the home to the buyer for the agreed upon price, as long as a list of conditions are met. At this point, the escrow process begins.
In most cases, a buyer will be receiving financing from a lender and that lender will want to confirm the borrower's approval for the loan and confirm the value of the property.
Whether the buyer is financing the purchase or paying cash, there are a few other things that will take place while the sale is pending, including:
- Home inspection
- Securing homeowner's insurance
Why do pending sales sometimes fall through?
In some cases, a pending sale will fall through during this escrow period. There are many reasons this might happen, and we've outlined the most common reasons below.
Issues with Financing
Before a buyer makes an offer, they will receive initial pre-approval for their loan. This is not the same as official loan approval, which is given after the underwriters with the lender complete an even more thorough review. Delays or even a change in approval status can take place in some cases, if the buyer changes jobs, is found to have provided false information, or has a change in credit score or debt-to-income ratio.
Home Inspection Report
After the home inspection report is given, unexpected problems may be revealed. The buyer can decide in this case if they are still interested in moving forward with the contract, and are legally allowed to back out if the condition of the home is not what they expected.
Negotiations may also take place after the home inspection report is provided, with the buyers asking the sellers to either have the repairs done before closing, provide a credit at closing to cover the cost of the repair, or be willing to accept a lower purchase price.
Lower than Expected Appraised Value
Part of the escrow process is hiring a professional appraiser to assess the value of the property. If the appraised value of the home comes back lower than the accepted offer, the buyer might negotiate a lower price that reflects the appraised value. In many cases, a lender will not allow the buyer to borrow enough to cover the higher purchase price, requiring the buyer to either provide more cash to cover the difference or ask for a lower price.
In some cases, an agreement cannot be reached or the financing simply will not work out, requiring the sale to fall through.
Liens or Title Issues
Part of the job of the underwriters and the title company are to research the history of the property. If any liens on the property or title issues are revealed, they may not be able to be resolved and will result in the pending sale falling through.
What happens after a pending sale falls through?
If the sale does fall through, the home can be put back on the market, and the process begins again. While this delay can be annoying for sellers, the process is a necessary way to protect all parties involved in a real estate transaction.