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Why Do Houses Fall Out of Escrow?

November 9, 2022
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Will Your House Fall Out of Escrow? –

You finally found the perfect house. It has everything you’ve been looking for, and you’re ready to make an offer. The seller accepts, and you’re in escrow. But then, something goes wrong. The loan falls through, the inspection reveals hidden damage or the sellers back out. Suddenly, your dream home is no longer yours. But why do houses fall out of escrow? Let’s take a look at some of the most typical reasons why houses fall out of escrow.

1. Financing Issues

One of the most common reasons a deal falls out of escrow is that the buyer cannot secure financing. This can be due to several factors, such as a change in employment status, a decrease in income, or an issue with the property itself (such as hidden damage discovered during the inspection). The deal will usually fall through unless the buyer can secure alternative financing.

2. The Buyer Gets Cold Feet

Sometimes, buyers get cold feet about their purchase. They may have buyer’s remorse or second thoughts about whether they can afford the house. In other cases, they may find another property they like better and pursue that instead. The deal will probably fall through if the buyer backs out for any reason other than those specified in the contract.

3. The Seller Gets Cold Feet

It’s not just buyers who can get cold feet; sellers can get too! If the seller decides that they don’t want to sell after all—perhaps they’ve had a change of heart or found another property they like better—then the deal will also probably fall through.

4. The Property Doesn’t Appraise for the Purchase Price

If the property doesn’t appraise for at least the purchase price, it’s unlikely that the deal will close. That’s because lenders will only finance up to the appraised value of the property; if it appraises for less than the purchase price, then the buyer will need more financing to close on the deal.

Conclusion

There are many reasons why deals can fall through at escrow; sometimes, it’s due to financing issues, and sometimes, because one of the parties has cold feet. However, if you’re aware of these potential pitfalls ahead of time, you’ll be better prepared if your deal does happen to fall through. Contact us for more information about our escrow services.

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