Why Do Buyers Back Out of the Real Estate Transaction?

Bettina Siochi
Jun 30, 2021
5 min

A real estate transaction is hard to close. So many moving parts make it stressful and hard to maintain.

That’s why they pay real estate agents the big bucks.

A buyer can back out of the deal at any given time for many reasons. As a real estate agent, you must be aware of these should you ever encounter them.

Here are some of the most common reasons buyers back out of real estate transactions:

Buyer’s Cold Feet

One of the most common reasons a buyer backs out is they get cold feet. Buying a home can be overwhelming for any homebuyer.

Aside from the emotional journey that they go through while choosing a home, it is also time-consuming. From going to several open houses to finishing the paperwork, buying a home is no easy feat.

On top of that, it’s a major investment! Most likely the biggest investment they will make in their lives.

That comes with a great deal of pressure and commitment. A buyer may realize that they’re not ready to make a decades-long financial commitment.

Home Inspection Calls for Improvements

A real estate transaction may fall through because of unexpected expenses, even with qualified homebuyers.

Aside from the mortgages, there may be several repairs required for the property. This realization usually happens after the home inspection. A home inspector’s job is to examine and check every square foot of the property and report back to the buyer.

The results may show the need for major repairs and that can scare away a buyer.

To prevent this from happening, it’s worth suggesting to your sellers that they hire a home inspector before the listing. Should they agree, review the results with them and discuss possible options. They may choose to take on minor repairs, major repairs, both, or neither. Either way, it would still be helpful for you and your sellers.

Being aware of the issues and repairs that are needed immediately gives you an upper hand with the negotiations. Also, you can value the listing at an appropriate price post-inspection. This way, you mitigate the risk of the buyer backing out.

A Fresh Pair of Eyes

Sometimes, the homebuyer changes their mind. The home buyer might see the property for the first time and fall in love.

Then, later, when they have a fresh pair of eyes, it could look different. A buyer can visit the property again after some time and realize that they’re no longer confident in buying.

Unfortunately, this could happen in the middle of the real estate transaction. Remember to always ask questions to understand what it is about the property they don’t like. That way, you can always provide them with the best options later.

They Find a Better Option

Keep in mind that a homebuyer is looking at more than one house. When they walk into your listing, they can be ecstatic – enthusiastic about living in that house. At the same time, they can be making offers on other homes.

This is because they want the best deal on a home. If their dream home breaks their budget, they will opt for their backup option.

As a result, you can lose a lot of time and energy engaging in a deal that falls through. A great solution for avoiding this to set a high earnest money deposit.

A high earnest money deposit will solidify your buyer’s commitment to you. Investing more money upfront creates more stakes and shows the buyer wants to buy your listing.

This doesn’t keep them around, of course. The buyer can still back out of the real estate transaction. But, if a buyer commits to the earnest money deposit, you will be more reassured that your buyer is serious about purchasing the listing.

Concurrent Closing Falls Through

It’s not unusual for a buyer to buy or sell a home at the same time. This is called concurrent closing. Most buyers get their funding from the sale of their previous home.

So, the buyer can back out of the real estate transaction because they can’t sell their first home.

What’s important in this situation is communication. Keep an open line with the other agent or the homebuyer to verify their progress.

If you receive a concurrent closing offer, you will know to change your expectations for the real estate transaction should you accept it.

Buyer’s Remorse

Have you ever bought something and asked yourself, “why did I buy this?” Sometimes, a buyer may not have any other reason for backing out other than a buyer’s remorse.

This usually happens after a buyer makes a huge investment. They may feel anxious and change their minds after committing out of the blue.

When someone experiences buyer’s remorse, it’s important to be patient with them. As the listing agent, it’s your job to lay down the facts with your potential buyer and remind them of why this is a worthwhile investment.

Final Thoughts on Backing Out of the Real Estate Transaction

Understanding why people back out of the real estate transaction is hard. From cold feet to buyer’s remorse, there are tons of reasons why that would happen.

This is what makes the job of a real estate agent so emotional.

The answer to coping with the everchanging real estate transaction is to do everything you can to close the deal. So, if things go awry, remember that it’s a-okay. It happens. It’s part of the job.

Everyone has their reason for terminating the real estate transaction. Staying positive, not becoming obsessed with closing, and fulfilling your duties to the best of your ability help you increase your chances of closing and also creates the best possible experience for all parties.

Every week, we release in-depth videos to help viewers become successful real estate agents on our CA Realty Training YouTube Channel. Also, if you enjoyed reading this article, we would love if you could share it with a friend who you think would get something out of it.

Bettina Siochi
Jun 30, 2021
5 min