Why Do Homes Return Back To The Market After Having Accepted An Offer

Once a homeowner has accepted an offer on their home there is still a process to undergo before the actual transfer of ownership takes place.  There are a number of contingencies that must be met prior to closing where the actual ownership of the home is transferred to the buyers. Once an offer is accepted the status of the home in the Multiple Listing Service is usually changed to “Pending” to reflect that an offer has been accepted and closing is waiting on certain things to happen before it finally can close.  This article explores some of the common reasons a home may fall out of pending status and come back to the market for sale.

Inspection Issues

One of the more common reason a home falls out of contract is due to inspection issues.  A majority of homebuyers opt to have a home inspection performed after an offer is accepted.  A home inspector will inspect a home to check for any major issues and provides a report to the buyers detailing the overall condition of the home.  Some of the common major home inspection issues uncovered can cause a buyer to walk away from their purchase if they feel the cost of dealing with the issues are too high and/or they could not come to agreement with the seller to either have the seller make repairs or reduce the price.  

In some situations like foundation or structural issues, roof in need of replacement, mold issues or more homebuyers may feel like the costs of dealing with such an issue is too much for them to handle after making a home purchase that they would rather not deal with at all and will walk away from the deal.  If the homebuyer walks away from a home due to a major issue and the home seller becomes aware of the issue the seller is then required to disclose that issue to any future buyer.  Failure to disclose the issue could subject the home seller to a lawsuit and even reversal of a home sale.  After the buyer cancels a deal to buy a home due to inspection issues the seller has the option to put the home back on the market for other buyers to consider.

Financing Issues

Another common reason why an offer to purchase a home falls through is the financing for the buyer falling apart.  A majority of homebuyers are buying a home with a mortgage and do not have sufficient cash to be able to cover the purchase of a home.  If the buyer’s mortgage application is denied for some reason then the home cannot be purchased and usually will be put on the market again. Common reasons for a homebuyer not being able to get a mortgage include the buyer losing their job, changing jobs, extending too much credit (store credit, credit cards, auto loans and more), or they were improperly qualified  for the mortgage in the first place.

Even at the closing table with every party ready to sign their documents and complete the sale, mortgage loans have been known to be denied at the last minute.  A real life story of this happening involves a buyer bragging to everyone at the closing table about the brand new sports car he just purchased.  The closing processor tried to change the subject so the buyer would stop talking about the car, but the buyer would not take the hint and insisted on mentioning the newly purchased car.  The closing processor was forced to call the lender and explain what they had heard. The lender after hearing about the new car re-ran the credit for buyer and determined with the new loan for the car they did not meet the required debt to income ratios and as a result the loan was denied.  

Another example involves a homebuyer who made an offer on a home with a pre-approval letter that appeared to be good.  After the offer was accepted the buyer’s lender tried to change the loan type that the buyer would be using to make the purchase of the home without getting the seller to agree to the change.  Most offer documents include language to indicate what type of loan the buyer will be using, which in this case the buyer agreed to purchase the home with an FHA loan.  Only the buyer was not really qualified for an FHA loan and their lender tried to change their loan product in order to get them qualified.  The buyer fired the lender due to the issues with their loan and tried to get financing with another lender who said they were not qualified based on their current credit rating.  As a result the offer to purchase that home had to be cancelled and the home went back on the market. 

Did Not Meet Appraisal

Another cause for a home falling out of contract is the home not being appraised in accordance with the price of the offer.  If the home is appraised for less than the offer price and the seller is unwilling to reduce the price or the buyer is unwilling to put extra money towards the purchase of the home then the deal to purchase the home can be called off.  A mortgage lender will not lend to purchase a home where the price to be paid under the contract is higher than the appraisal amount and the buyer is not putting additional money down to bring the loan amount down.

Buyer Walks Away

While not very common the buyer can simply decide they don’t want to purchase the home and they simply walk away from the deal.  The buyer can refuse to attend closing and sign documents to complete the purchase. If that happens the seller can request to keep the earnest money if any was paid and sue the buyer for damages due to lost time while the home was not on the market.  The seller could not sue for the entire amount of the contract and likely would not win if they asked a court to force the buyer to purchase the home as most courts will not force buyers to complete the purchase.  Instead the court will award monetary damages to the sellers.

What Happens To A Home When It Comes Back On The Market?

If a home sale fell through due to an inspection or appraisal issue when the home comes back on the market the price may be adjusted downward to reflect any issues.  If a home seller opts not to reduce the price then in the case of an inspection issue that must be disclosed, many buyers may shy away from making a full offer on a home with inspection issues unless the issues were repaired.  If a home comes back to market after buyer financing falls through and there are no other issues chances are the perception of the home and its quality will not be affected and it should still be able to sell without a discount.

Bottom Line

There a number of reasons why a home under contract for purchase can fall through and return to market. The chances of a home sale falling through are not very high so it does not make sense for buyers to wait around for a particular home to come back to market.  If a home does come back to market after going Pending on a sale homebuyers should be asking questions of the seller as to why the home is back up for sale and make their offer accordingly. 

Additional Resources

• A Guide To Real Estate Appraisals by Bill Gassett
• Smart Home Buying Tips by Sharon Paxson
• Home Inspection Negotiation Tips by Jeff Nelson
• Home Buyer Confessions by Lynn Pineda

About the author: The above article “What Are Fixtures In Real Estate?” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you.  Contact me today!

I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.