Experienced. Driven. Effective.

3 times a buyer may need to back out of a scheduled closing

On Behalf of | Feb 9, 2024 | Real Estate Transactions

The negotiation of a real estate purchase agreement can sometimes require weeks to complete. Once buyers and sellers have agreed on a price, a possession date and other key details, most parties may view the deal as essentially complete. While buyers do need to sign key documents, as do sellers, people tend to view that as a mere formality. Both parties have already committed to follow through with the transaction, and a cancellation might lead to financial and legal consequences.

Despite the assumption that a signed agreement means the transaction is all but a done deal, some residential real estate closings fall through at the last minute. The following are some of the most common reasons that buyers in particular may cancel a closing after making an offer on a property.

After a low appraisal

Fluctuations in the real estate market can make buying property particularly unnerving. Buyers need to make an offer that is attractive to the seller but also need to protect themselves against overpaying. Mortgage companies also have an interest in ensuring that the sale price or the property is reasonable. Appraisals are standard during financed residential real estate transactions. Sometimes, the appraisal comes in low, and the buyer may then need to cancel the transaction either to protect themselves or because they cannot secure financing.

Sudden financial challenges

Life has a way of throwing complications at those trying to make major changes. Someone in the midst of buying real property might lose their job or end up in the hospital with an unexpected medical emergency. Buyers may find themselves unable to qualify for a mortgage because of unexpected debt or a loss of income. They might also need to use the money that should serve as their down payment to cover other emergency financial needs. Financial challenges are a common reason to cancel a scheduled closing.

Major property issues

Inspections and surveys could uncover unfavorable information about a property. Maybe the lot is smaller send the seller claimed, or perhaps there are numerous property defects that they did not disclose. When there are unanticipated issues with the property, buyers may feel like it no longer fits their needs or that the price they offered is not appropriate.

Buyers hoping to cancel a residential real estate transaction may have to worry about the possibility of losing their earnest money. Buyers who work with real estate attorneys to draft custom documents may have an easier time protecting themselves from scenarios in which they might lose their earnest money or face litigation brought by a seller with major expenses linked to a canceled transaction.