Why Do Pending Home Sales Fall Through? Key Reasons & How to Prevent It

Approximately 3.9% of residential real estate transactions fail to close after an offer is accepted. While the majority of pending sales proceed smoothly, understanding the common pitfalls can help sellers navigate this critical phase with confidence. The period between an accepted offer and the final closing, often called being "under contract," involves clearing specific conditions known as contingencies. A sale falls through typically when a buyer's contingency cannot be met, such as financing issues or problems uncovered during a home inspection. This guide outlines the primary reasons deals collapse and provides actionable strategies to safeguard your transaction.

What Does 'Pending' or 'Contingent' Mean in a Real Estate Listing?

When your home's status changes from "active" to "pending" or "contingent," it signifies you have accepted an offer, but the sale is not yet final. The term "under contract" is synonymous with this phase. A "contingent" status specifically indicates that the buyer must satisfy certain conditions outlined in their offer before the sale can be finalized. These are legally binding clauses that allow the buyer to back out of the deal without penalty if the conditions are not met. Common examples include the sale being contingent on a satisfactory home inspection or the buyer securing a mortgage.

What Are the Most Common Reasons a Pending Sale Falls Apart?

Several factors can disrupt a home sale during the contingency period. Recognizing these risks is the first step toward mitigating them.

1. The Home Inspection Contingency A home inspection contingency is a standard clause that gives the buyer a designated period to have the property professionally inspected. If the inspection report reveals significant issues, such as a faulty roof or foundation problems, the buyer can typically renegotiate the sale price, request repairs, or withdraw their offer entirely. Sellers can avoid surprises by considering a pre-listing inspection, which allows you to address problems proactively.

2. The Appraisal Gap In a competitive seller's market (a market condition characterized by high demand and low inventory), bidding wars can push the final sale price above the home's appraised value. A lender will only issue a mortgage based on the official appraisal—a professional assessment of the property's market value. If the appraisal comes in lower than the sale price, the buyer must often pay the difference in cash, the seller must lower the price, or the deal may terminate.

3. Financing Falls Through Even a pre-approved buyer can face financing issues. A change in the buyer’s financial status—such as a job loss, a significant new debt, or a drop in their credit score—can cause a lender to withdraw loan approval. Based on our experience assessment, financing problems are among the most frequent causes of failed transactions.

4. Issues with the Property Title Before closing, a title search is conducted to uncover any outstanding legal claims or liens (a legal right or claim against a property as security for a debt) on the property. Major title issues, like an unknown heir claiming ownership or unpaid property taxes, must be resolved before the sale can proceed, potentially derailing the closing timeline.

5. Buyer Home Sale Contingency This contingency makes the purchase of your home dependent on the successful sale of the buyer's current home. If the buyer cannot sell their property within a specified timeframe, they can walk away from the deal. This type of contingency can significantly extend the pending period and introduce uncertainty.

6. Buyer's Remorse The emotional decision to buy a home can sometimes lead to buyer's remorse, particularly among the 42% of purchasers who are first-time buyers. Faced with the magnitude of the decision, a buyer may seek a way out, often using a contingency clause to cancel the contract.

How Can Sellers Minimize the Risk of a Failed Sale?

To increase the likelihood of a successful closing, sellers should take proactive steps.

• Carefully Evaluate Offers: Prioritize offers with fewer contingencies and strong financial credentials. An offer with a 20% down payment and a solid pre-approval letter is often safer than a higher offer with numerous conditions. Your real estate agent is instrumental in assessing the strength of each offer.
• Avoid Buyer Home Sale Contingencies: When possible, be cautious of offers contingent on the sale of the buyer’s home. This contingency places the success of your sale on a transaction outside of your control.
• Complete a Pre-Inspection: Ordering a pre-inspection before listing your home allows you to identify and address repair issues upfront. By disclosing known problems early, you can prevent them from becoming re-negotiation points or deal-breakers during the buyer's inspection.
• Understand Contingency Timelines: Work with your agent to ensure all contingency deadlines are clear. This helps keep the transaction on track and allows you to quickly relist the property if a buyer does back out.

While no sale is guaranteed until closing, understanding these common challenges empowers you as a seller. By vetting buyers carefully, minimizing contingencies, and preparing your property thoroughly, you can significantly reduce the risk of a pending sale falling through and move confidently toward a successful closing.