Discover the Most Common Reasons a Home Will Fall Out of Escrow in California

Discover the Most Common Reasons a Home Will Fall Out of Escrow in California

By the time a home sale gets to the escrow stage, it is often assumed that the sale is definitely going through. This is false. There are actually a few reasons that a house might fall out of escrow. Keep reading to learn some of the most common reasons. At Neighborhood Escrow, we have seen it all and can answer your questions about escrow.

The Buyer Does Not Get Their Mortgage Application Approved

One of the most common reasons that a home falls out of escrow is that the buyer’s mortgage application is designed. There is no question that if a buyer’s funding falls through, then they cannot buy a home. A lender might initially approve a buyer but deny them closer to the actual sale due to a change in job status, additional debt accrual, or an inability to confirm the information on their application.

Something Might Come Up During the Home Inspection

A home inspection is a necessary part of the home buying process. It allows the buyer to get the information they need before the final purchase and gives them the chance to walk away – with their earnest money – if there is a serious issue. If that happens, then the buyer can put an end to the sale, and escrow will be over.

The Home Might Appraise for Less Than the Agreed-on Sales Price

If a home appraises for less than the agreed-on sales price, then the lender might then require that the buyer put down an additional down payment to make up the difference. The lender also has the right to decline to give the loan at all. If either happens and the buyer cannot come up with the extra cash or get financing elsewhere, then the home might fall out of escrow.

The Buyer Cannot Sell Their Home

It is common for a buyer that the purchase is contingent upon them selling the home they own. The unfortunate thing is that this does not always work out the way everyone had planned. If that happens, then the buyer can fall out of escrow. It might be that they included a contingency in their offer that stated they had to sell their home within a timeframe in order for the sale to close.

There’s a Lien or Other Title Issues

In some cases, the title process will come up with property liens or other issues with the title that leads to an inability for the seller to sell the property without significant action taken. At this point, the escrow company can let the seller know what they must do for the sale to close. If this cannot be done, then the loan might fall out of escrow.

At Neighborhood Escrow, we work diligently to ensure that all contingencies are met ahead of time so that there are no surprises at the closing table.

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