Why buyers back out
Most deals that fall apart do so for a reason written into the contract. Common ones include:
- Inspection issues the buyer and seller can't agree on.
- A low appraisal, when the buyer can't or won't cover the gap.
- Financing that falls through.
- The buyer's own home didn't sell, if the contract was contingent on it.
- Title problems or a condo or HOA review that raised concerns.
- A change in the buyer's job, finances or plans.
Contingencies and deadlines
A contingency lets a buyer cancel if something specific happens, usually by a deadline. If a buyer cancels within a contingency and follows the contract's notice rules, they generally can. If a deadline passes and the buyer hasn't acted, that protection may be gone.
Read your contract's dates closely, and ask your agent to track them for you. Many disputes come down to whether notice was given on time.
What happens to the earnest money
Earnest money is the deposit a buyer puts down to show they're serious. It's usually held by a title company, attorney or broker, not by you. Who gets it depends on your contract.
If the buyer backs out under a valid contingency, the deposit is usually returned to them. If they walk away without a valid reason, the contract may let you keep it. Release often requires both sides to sign, and disputes can take time. Rules vary by state, so ask a real estate attorney if there's a disagreement.
Your next steps
- Ask your agent about backup offers. A buyer who was outbid may still be interested.
- Confirm the cancellation in writing and settle the earnest money question.
- Look at the reason. If it was an inspection item or appraisal, decide whether to fix, disclose or adjust price.
- Relist quickly and update your listing status.
- Revisit your price if the market has shifted.
How to reduce the risk next time
- Review buyers' pre-approval letters closely, and ask how strong the financing is.
- Consider a pre-listing inspection so issues surface before you go under contract.
- Price in line with recent comparable sales to lower appraisal risk.
- Keep contingency periods reasonable and clear.
Telling the next buyer
A deal that fell through doesn't have to hurt your sale. Buyers and their agents will see the listing went back on the market. A short, honest reason, like the buyer's financing or their home sale, helps. If an inspection turned up a problem, you may have disclosure duties, so ask your agent what applies where you live.
Selling with CapCenter
CapCenter's full-service Realtors handle offers, contract deadlines and relisting for you. Where we offer realty services, our standard listing fee is 1.5%, with a $3,000 minimum. Sell with us and buy, or finance, your next home with CapCenter within a year, and it's 1%. The buyer's agent's commission isn't included. Realty services are available in VA, NC, MD and DC.
