Interesting question I got this last week about a house falling out of escrow. Once you have an accepted offer on a house, escrow can open until the home "closes" escrow and you can move in. But there are several ways that a home can actually "Fall out of escrow" and you'll want to avoid these mistakes or issues when they arise so you don't lose your home or if you are the seller you don't lose the buyer and have to relist the house.
The Buyer Backed Out
This can happen although it's certainly not a happy occasion when it does. This can happen for a number of reasons and if there is no good reason, you could argue to keep the earnest money deposit for all your stress and despair. But if the home doesn't appraise for the list price, if there is too much wrong at the inspection and the buyer doesn't want to deal with it or other extenuating circumstances, the buyer could back out and the property would fall out of escrow.
Ways to Avoid This:
There are ways to avoid a home falling out of escrow and by sellers doing all they can to prevent it, may help the entire process.
Be honest - Being honest with your agent about everything on the house will make it easier for the agent to negotiate and convince the buyer to close. It's like a lawyer trying to represent you; hard to do if you don't know the truth or all the facts.
Get a pre-approved buyer - One major reason deals fall through is that the buyer is not pre-approved for a loan. If you accept an offer then find out later the buyer can't deliver, you have to go back on the market. Only accept an offer from a pre-approved buyer.
Require Earnest Money - If buyers know they have a little invested in the property they are less likely to back out for no reason. Most of the time an earnest money deposit is between 1%-5% of the purchase price of the home. This hefty deposit may prompt the buyer to put more effort into closing the deal.
Timely Manner - Get things done in a timely manner and have your agent check with the buyers agent to make sure contingencies are being handled and completed and all addendum are competed promptly if necessary.
There are ways to prevent a lot of errors and issues but sometimes it just happens. One of the oddities of real estate transactions is that every single one is different. This is why using an experienced agent is so crucial to the home buying and selling process. The more experience on odd transactions, the more confident you can be that your deal will be handled properly.
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