Walking away from closing happens more often in buyer’s markets than in seller’s markets. That’s because in buyer’s markets, when prices are soft, some buyers become frightened when they should be jumping for joy. Many are afraid of further declines in the market and don’t feel comfortable because all their friends aren’t buying.
The fear begins to creep in right after the purchase offer is accepted and builds. By the time full-blown panic has set in, it’s typically a day or two before closing.
Sellers Who Walk Away From Closing
It’s rare that a seller walks away from closing. If sellers are going to feel seller’s remorse that typically happens upon offer presentation when the reality of actually selling sets in.
Why Home Buyers Walk Away From Closing
Well-written purchase offers generally contain contract contingencies that must be removed within a certain period of time. The time to walk away from closing or cancel a contract for most home buyers is during the contingency stage. Buyers who walk away at the last minute often do so for the following reasons:
1. Foundation cracks that are beyond normal. Small hair line cracks are considered normal and are caused by the shrinking and settlement of the concrete itself. Larger cracks are sometimes caused by large tree roots or poor compaction of the surrounding soil. Even poor soil conditions.
2. Mold. At times mold will come up on the report. Mold In large amounts can be caused by long term roof leaks, plumbing and irrigation damage. The health effects attributed to mold exposure may be Respiratory failure/asthma, Flu symptoms/headaches; Nose bleeds/bleeding lungs, Dizziness, Learning disabilities. The more serious health effects attributed to mold are more commonly found in people who already have compromised systems. Most people are not noticeably affected by small levels of mold.
3. Asbestos. Any home built before 1978 will contain asbestos of some type, unless it’s been removed. In older homes where the new owner wants to renovate the entire home, it is best to know where the asbestos laden products are and call a professional to remove them. This can impact the renovation budget heavily.
4. Lead. For young families with small children a home with lead paint can be a big issue. Many times I find paint peeling or flaking off. Small bits of paint can then be ingested by children. The lead paint removal process is a timely and costly.
5. Roofing system replacement. The roof system is one of the most important parts of the house. Replacing a roof can cost thousands and in some case even over ten thousand. Wood damage under the roof will cause the replacement price to escalate quickly.
6. Wood destroying insects and organisms. Subterranean termites are the most common termite in the United States. A mature colony has from 80K to 400K workers. The average colony can consume a one foot length of 2×4 in 118 days. The Powder post beetle. The most common evidence of a powder post beetle infestation is a talcum powder-like substance known as frass. This frass falls from exit holes made by the beetles. The Carpenter bee. The carpenter bee will bore into the wood six to ten inches and nest in weathered or unpainted wood. They lay their eggs in the nest and seal them with a chewed wood pulp plug. The bees then emerge from the hole in the spring. The carpenter ant. This ant hollows out wood to create nests called galleries. Though they do not eat the wood, the boring activity can lead to structural damage in wood components. The by-product of the boring is called frass and looks similar to sawdust or pencil shavings. Frass is the most common evidence of carpenter ants infestation. Wood-Decay Fungi. White rot leaves wood with a bleached appearance and a spongy and stringy texture. Brown rot leaves wood with a dark brown, checkered appearance and a brittle texture. Note: wood that exhibits brown rot has lost its structural integrity and is easily crumbled. Water-conducing fungus or “dry rot” produces decay similar to brown rot, but may vary in color. Fungus (fungi, plural) is a plant that lacks chlorophyll. Unable to synthesize their own food, they feed off of cells in the wood. The fungi secrete enzymes that break down to wood (into usable food) and can significantly reduce the strength of the wood. Long term infestation by any of these WDI can lead to the loss of structural integrity.
7. Household pests. This includes a variety of crawling insects, arachnids and rodents that enter the home to feed, nest or breed. Rats and mice are the most common finds in Southern California homes. This is especially true in homes that have a verity of fruit trees and date palms. Rodents can cause thousands of dollars in damage to the homes systems and equipment. They can eat the insulation off electrical and control wires. They can nest and destroy HVAC ducts as well. Rat and mice can nest in the wall and ceiling cavities. The damage may not always be seen. A lot of time the wires and insulation damage will be concealed in the walls.
8. Missing or damaged systems and equipment, such as plumbing, electrical and heating and air condition equipment. Many homes are being sold as is. Many are Bank Owned. When homes are left unattended they are subject to thieves removing HVAC equipment appliances, copper wire and plumbing. Damage to masonry fireplace or chimney from earth quakes or differed maintenance can be costly repairs.
9. Signs of past fire damage. Even after repairs have been made many people can’t get past the feeling of bad luck that comes with a home that’s been involved in a house fire.
10. Death or Murder in Home. We saved the worst for last. Everyone has seen Amityville Horrors. I have never met anyone who went thru with the purchase of a home after this kind of disclosure.
Repercussion After Walking Away From Closing
Unfortunately, once buyers have released contingencies from the contract, their earnest money deposit is at risk. Some contracts call for liquidated damages in the event of default. Without liquidated damages, a seller may be free to sue for actual damages, which could exceed the deposit.
For more advice, please consult a real estate lawyer.
