When Do Buyers Back Out At Closing?
Buyers backing out at or near closing is uncommon but not rare. On average:
🔢 Estimated Back-Out Rate at Closing:
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3% to 5% of residential real estate transactions fall through at or near closing.
🧯 Common Reasons Buyers Back Out at Closing
| Reason | How Often It Happens |
|---|---|
| ❌ Financing falls through | Very common – 30–40% of fallouts |
| 🕵️ Home inspection issues (late discovery) | Some – if waived earlier, can still surface |
| 📉 Appraisal comes in too low | Common in hot or overvalued markets |
| 📑 Title issues or legal problems | Less common but serious |
| 😨 Cold feet / emotional withdrawal | Rare but does happen |
| 💼 Job loss or life change | Occasionally |
| 🏦 Lender delays or paperwork errors | Timing-related cancellations possible |
📍 Arizona Market Note:
In Arizona’s active markets like Phoenix or Sedona:
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Most cancellations happen during inspection or financing, not at the signing table.
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Cash buyers are less likely to back out last-minute.
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Escrow companies in Arizona typically help ensure red flags are addressed well before closing day.
🛡️ How Sellers Can Reduce Risk
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✅ Pre-approve buyers (not just prequalify)
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🧾 Request a higher earnest money deposit (1–3% of purchase price)
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🔍 Encourage early inspections
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📝 Tighten contingency dates
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⚖️ Work with experienced escrow/title professionals
💰 What Happens Financially?
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If the buyer backs out without a valid contingency, they usually lose their earnest money deposit.
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If backed out for a legally protected reason (e.g., failed financing with a contingency), the buyer may get the deposit back.
Sellers Checklist to Protect Against Fall-Throughs
✅ Seller’s Checklist to Protect Against Fall-Throughs
Use this before and during your real estate transaction
🧾 1. Before Accepting an Offer
| Task | ✔️ Done? |
|---|---|
| ☐ Verify buyer is pre-approved, not just pre-qualified | |
| ☐ Confirm proof of funds for down payment and closing costs | |
| ☐ Require earnest money deposit (at least 1–3% of offer) | |
| ☐ Understand all buyer contingencies (inspection, appraisal, financing) | |
| ☐ Favor offers with shorter contingency timelines | |
| ☐ Review buyer’s lender reputation with your agent |
🔍 2. During Inspection Period
| Task | ✔️ Done? |
|---|---|
| ☐ Disclose all known material defects in writing | |
| ☐ Provide easy access for home inspection and follow-up | |
| ☐ Review inspection response quickly with your agent | |
| ☐ Be willing to negotiate reasonable repairs or credits | |
| ☐ Respond to repair requests within contract deadlines |
🏦 3. During Appraisal & Financing
| Task | ✔️ Done? |
|---|---|
| ☐ Work with buyer’s lender to schedule the appraisal promptly | |
| ☐ Prepare the home to look well-maintained for appraisal day | |
| ☐ Provide your agent with comps to support value | |
| ☐ Consider an appraisal gap clause if buyer includes one | |
| ☐ Confirm buyer has loan commitment letter by deadline |
📑 4. Leading Up to Closing
| Task | ✔️ Done? |
|---|---|
| ☐ Keep in regular contact with escrow/title company | |
| ☐ Confirm all title, HOA, and seller disclosures are submitted | |
| ☐ Don’t make major changes to the property (unless required) | |
| ☐ Ensure all agreed-upon repairs are completed with receipts | |
| ☐ Walk through net proceeds statement with your agent | |
| ☐ Be flexible with final walkthrough and move-out scheduling |
🚫 Extra Tips to Avoid Buyer Back-Outs
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Avoid accepting offers with weak or vague financing contingencies
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Don’t conceal known issues — this can later be used as buyer leverage or reason to walk
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Consider backup offers if available
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Make sure your listing agent communicates frequently with buyer’s agent and lender
How To Negotiate Stronger Buyer Contingencies
Negotiating stronger buyer contingencies is all about reducing risk and uncertainty for you as the seller—while still keeping your deal attractive to serious buyers. Here’s how to approach it strategically:
🧠 What Are Contingencies?
Contingencies are “escape clauses” that allow buyers to back out without penalty if certain conditions aren’t met (e.g., inspections, appraisal, or loan approval).
🛡️ How to Negotiate Stronger Buyer Contingencies
1. ✅ Shorten Contingency Deadlines
Why it matters: Long contingency periods let buyers stall or walk late in the game.
| Contingency | Standard Time | Aim For (Seller-Friendly) |
|---|---|---|
| Inspection | 10 days | 5–7 days |
| Appraisal | 17 days | 10–14 days |
| Loan Approval | 21 days | 14–17 days |
🎯 Tip: Ask buyers to waive the loan contingency if they’re putting 20%+ down and are strongly pre-approved.
2. 🧾 Limit or Remove Certain Contingencies
Some buyers will agree to waive lower-risk contingencies to make their offer more competitive:
| Contingency Type | Can It Be Waived? | Risk to Buyer |
|---|---|---|
| Financing | Sometimes (with cash or strong pre-approval) | Medium |
| Appraisal | With gap clause or cash reserves | Medium-High |
| Home sale contingency | Yes (discourage accepting offers with this) | High |
| Inspection | Often shortened, sometimes waived entirely | High |
⚠️ Note: Waiving inspection is risky for the buyer. Instead, you can ask them to do “informational only inspections” or no repair requests.
3. 💰 Increase Earnest Money Deposit
Higher earnest money (e.g., 2%–5%) shows buyer commitment and raises the stakes for walking away.
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If the deal falls through without valid contingency, you keep the deposit.
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Ask for non-refundable deposit after contingencies expire.
4. 📋 Request Appraisal Gap Coverage
If the appraisal comes in low, this clause commits the buyer to cover the difference out of pocket, up to a certain limit.
Example:
“Buyer agrees to cover up to $10,000 of any appraisal shortfall.”
This protects you from price renegotiation if appraisals are lagging in a rising market.
5. 🧠 Vet the Buyer’s Financial Stability
Your agent should contact the buyer’s lender to verify:
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Full pre-approval (not just pre-qual)
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Down payment source is confirmed
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No red flags (like contingent home sales or debt ratios near limits)
6. 🏡 Encourage Back-Up Offers
Even if you’re under contract, letting buyers know you’re still accepting backup offers motivates them to:
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Keep the process moving
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Avoid nickel-and-diming you
🧾 Bonus: Sample Language to Add to Offers
“Buyer agrees that earnest money becomes non-refundable upon expiration of all contingencies unless Seller fails to perform.”
“Buyer acknowledges that inspections are for information only, and Seller will make no repairs.”
Craig Cherney is a trusted client advisor and a sought after real estate lawyer and expert witness who is hired by the nation’s top Real Estate Litigation Attorneys to help resolve their litigated real property matters. Craig has appeared as a testifying expert witness before judges and juries in California, Arizona, Nevada and other jurisdictions across the country. Craig Cherney, Esq. Expert Witness Real Estate. 480-399-2342. If you are litigating an easement case, Craig Cherney might be able to help you advance and win your case.