Why Real Estate Deals Fall Apart Before Closing

My client called me early on a Tuesday morning, about a week before closing. “I just got downsized,” he said. We had gone under contract on his new home roughly four weeks earlier, and he was four days away from sitting at the closing table. “What do we do?” Having been a high producing Realtor for the last 20 years, I’ve seen real estate sales fall apart for just about every reason under the sun. Going under contract can feel like the finish line but it isn’t. It’s the starting line for an entirely different race. Nationally, somewhere between 5 and 7 percent of real estate contracts fall apart before closing according to NAR data. In my own experience across hundreds of transactions, I’d put that number closer to 7 percent. Here’s what actually kills deals before they close. The Home Inspection Is Where Most Deals Die The biggest cause of failed closings is the home inspection. Usually not the small stuff but the big ticket items. Foundation problems, roof failures, and mold. A roof replacement can run $15,000 to $40,000 depending on the size of the home. Foundation issues carry significant price tags and often involve water intrusion. Mold is a health concern and requires professional remediation. When any of these show up in an inspection report, the deal is in jeopardy. Here’s what I tell sellers before we ever go to market. Once something surfaces in a home inspection, it has to be disclosed to every buyer. If the buyer walks over a foundation crack, it has to be disclosed to the next buyer. So you’re either fixing it for this buyer or you’re fixing it for the next one. Homeowners who refuse to address a serious issue found during an inspection end up relisting with a known defect. Dealing with the issue is almost always the smarter play. Sellers who’ve been through a failed inspection negotiation and don’t want to go through it again sometimes find that working with a we buy houses cash buyer makes more sense for their situation. Cash buyers purchase properties as-is with no inspection contingency, and sellers know exactly what they’re getting rather than wondering if the next buyer walks for the same reason the last one did. A Good Realtor Digs into Financing My client lost his job four days before closing and we were able to terminate his purchase because of the financing contingency in the contract. A bank is not going to give you a loan when you’re unemployed. The seller was furious and refused to release his earnest money. After a couple of weeks, cooler heads prevailed and he got it back. But that’s not always how it ends. Good agents see financing issues before they become a crisis. Staying in regular contact with the lender, requiring appropriate documentation before going under contract, and understanding the buyer’s financial picture all help minimize surprises. That said, some things you can’t see coming. A job loss. A medical bill that hits between contract and closing. Sellers who insist on a fully pre-approved buyer before accepting an offer are not being unreasonable. The Appraisal Gap Problem When an appraisal comes in below the agreed purchase price, the lender will only finance to the appraised value. The variance has to be covered some other way. In a strong seller’s market I’ve watched buyers cover that gap out of their own pocket without much argument. In a softer market it’s just the opposite. Sellers reduce the price, both sides split the difference, or someone decides the deal isn’t worth saving. A low appraisal in a shifting market is usually telling you something about where the seller’s price expectations are relative to where the market actually is. Sellers who want more certainty the next time around sometimes look at options to sell my house fast to a cash buyer, where there’s no lender, no appraisal requirement, and no gap to fight over. Buyer’s Remorse Is Real I tell every buyer I work with the same thing before we ever make an offer. At some point during this process, you’re going to have a moment where you think: do I really want this house? Can I really afford this? What did I just do? It’s totally normal, happens to almost everyone including me when I bought my current home. It happens most in hot markets where buyers have lost out on two or three houses before finally getting one. All that competitive urgency evaporates the moment they’re under contract. You can see it on their faces, the look of fear and uncertainty. They went from fighting for the house to wondering if they actually want it. Most of the time they work through it. Sometimes they don’t. Title Issues My state requires sellers to complete a property disclosure form disclosing any known material defects. But title issues are a different problem. Unpaid contractor liens, old judgments attached to the property, errors in a prior deed, boundary disputes, unpaid taxes. These are more common with estate sales and inherited properties because of the complexity of how ownership transferred. A good title company catches most of this during the search, but catching it and resolving it are two different things. If a title problem surfaces close to closing it can take weeks to clear, and not every buyer is willing to wait. Flood Insurance and Coverage Surprises It doesn’t come up in every transaction, but when it does it can kill a deal. A property in a designated flood zone requires flood insurance as a lender condition. FEMA flood insurance premiums can be significant, and in some cases they’re high enough to change what the buyer can actually afford. Buyers should start shopping for insurance early in the transaction, not scrambling the week before closing. Warning Signs Your Deal Is in Trouble The biggest gut signal something is wrong is when the other side stops communicating. Not a day of silence. A pattern of it. Beyond that, watch for buyers asking for timeline extensions without explanation, a lender who keeps requesting the same documents, sellers turning unreasonable over minor repair items, and missed deadlines on either side. Small administrative mistakes compound fast when a transaction is already fragile. What to Do When Your Deal Shows Cracks The biggest mistake sellers make when a deal starts falling apart is burying their head in the sand. Hoping it resolves itself. Refusing to deal with the problems. It is almost always better to work through the issues directly. Buyers and sellers sometimes forget in a difficult negotiation that they have the same goal. One wants to sell the house. The other wants to buy it. A good agent on either side keeps that shared goal in focus and finds the path forward. It’s Never a Done Deal Until They Hand You the Money or the Keys My client got his earnest money back. It took a couple of weeks and some tense conversations, but it worked out. That’s not always how it ends. What “under contract” means is that both parties have agreed on terms. It does not mean the deal is done. There are inspections, appraisals, financing reviews, title searches, insurance requirements, and contingency deadlines between a signed contract and a closed sale. Any one of them can unravel a transaction that looked solid. I tell every client the same thing from day one. It’s never a done deal until they give you the money or give you the keys.