Failure to close in real estate is when a buyer or seller fails to fulfill their obligations in a transaction before the scheduled closing date. It’s a breach of contract that can lead to substantial consequences.
So, what causes this serious issue?
Buyer-related causes
A buyer may fail to close a real estate deal because their loan is delayed. Or when their mortgage lender refuses to guarantee their loan despite a pre-approval due to changes in their financial situation. Additionally, if the lender’s appraisal comes in lower than the purchase price, they might refuse to approve the higher amount, as this poses a financial risk to them.
A buyer may also fail to close a deal when they discover an issue with the property’s condition after an inspection. A home inspection contingency in a purchase agreement allows them to negotiate for a price reduction/repairs, or to terminate their contract without losing their earnest money deposit.
Other issues that can lead to failure to close include property titles and buyer’s remorse.
Seller-related causes
Some real estate deals fail to close because of the seller. Seller’s remorse is one of the leading reasons for this. One may agree to sell their property, but the deep emotional connection to their home can make it difficult. They might back out of the deal when it becomes too real.
Financial issues can also make a seller unable to close a deal by the agreed-upon date. For instance, when they experience an unexpected financial hardship that makes moving unviable.
Other reasons are title problems, delays in necessary repairs and a change in personal circumstances.
A real estate deal failing to close before the scheduled date can lead to damages to both the buyer and seller. If you are in such a situation, legal guidance can help you understand your rights.