Quick backstory, I use the same escrow officer to buy and sell houses. She is a true professional and knows how to do what she can to keep escrows moving along and to get them closed. But almost all the pieces needed to close escrow are out of her control. She just knows exactly how to keep those pieces moving in the right direction. BTW, her name is Jackie McGee of Peninsula Escrow and I highly recommend her.
So I asked Jackie, why do escrows fall out? Give me the top 3 reasons. And here they are:
1. Home Inspection
Major structural issues with a house will cause buyers to be very cautious and oftentimes, they will back out immediately. Or the seller won't agree to pay to fix those major issues. Buyers don't want houses with problems, even if they have the money to fix them. Most of the time, buyers don't have the money to fix them, though.
2. Loan Issues
This has multiple parts. First, the house may not appraise for the sale price. The seller may not agree to sell at the appraisal price and buyers often don't want to pay more than the appraised value. Viola! Not closing escrow. Second, the buyer doesn't have "sourced funds", meaning the funds the buyer is using for the down payment is untraceable. The buyer MUST have use funds that are accountable from savings, checking, gift money, sale of stocks, or from sale of real estate that the buyer owned.
3. Buyer Loses Job
Unfortunately, in this economy, a buyer may lose his/her job during escrow. It does happen, and it really is unfortunate.