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What could cause your home to fall out of escrow?

On Behalf of | Sep 20, 2022 | Residential Real Estate |

If you have ever shopped for a home you may have heard the term “fell out of escrow” from your real estate agent about a property you’ve been looking at.  Although you may react with a polite groan of sympathy for the seller, that’s generally good news for you as a buyer because it probably means the seller thought they had a deal and were already preparing to move.  That also means the seller may have lowered the price in the hope of getting a new buyer as soon as possible.

No seller wants their home to fall out of escrow.  Basically, it means the deal has fallen apart, and the agreement is no longer valid. Typically, that’s because of something that happened on the buyer’s side.

They decided not to buy the home

A buyer can always back out of a deal for any reason (or no particular reason).  However, the buyer should typically have a good reason.  If they don’t, they can end up having to forfeit their deposit or other “seller’s remedies” included in the agreement to help make up for the time the home was off the market with the sale pending.  Under Pennsylvania law, the seller could also potentially file a civil lawsuit against them.

If a buyer backs out due to an issue that was included as a contingency in the agreement (such as a serious mold issue or some other defect that wasn’t known or disclosed), they can get their deposit back.  If a seller is willing to pay to fix the issue or take some money off the price, this doesn’t have to be a deal-breaker.

Their financing fell through

Sometimes a buyer is able to get pre-qualified for a mortgage, but then something happens that makes them no longer qualified.  A job loss would be an obvious reason.  In that case, they probably wouldn’t be able to buy the home.  If it’s something less drastic, they might qualify for a smaller loan (and therefore have to come up with more cash).

Any number of things can go wrong in the process of a home sale.  That’s why it’s crucial to include provisions in your agreements that will help protect you as much as possible – especially in situations over which you have no control.  This is where having legal guidance can be valuable.



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