Putting a home on the market is a difficult enough process as it is, so few homeowners consider the possibility of a deal falling through once they have accepted an offer.

“The buying and home selling process is very stressful for both sides because there’s so many things that have to happen, and everything has to happen right in order for a deal to go through,” says John Myers, owner and qualifying broker of Myers & Myers Real Estate Inc. in Albuquerque, New Mexico.

A positive attitude is always important, but every home seller should be prepared to move forward quickly when a deal breaks down.

A real estate deal can fall through for a number of reasons, but is most often due to the buyer’s inability to obtain financing based on his or her financial background, the home appraising for less than the agreed-upon price by the lender or the home inspection revealing major deficiencies.

In each of these situations, the seller can either try to salvage the deal or re-enter the market in search of the right homebuyer. Here’s how to cope and decide on your next steps.

[See: 10 Tips to Sell Your Home Fast.]

When the buyer doesn’t qualify for a mortgage. It’s unfortunate when the buyer fails to receive approval from his or her lender based on financial history, but it’s a hurdle the seller should be able to move past quickly since it doesn’t reflect poorly on the home.

“That’s something [the seller] can’t control. If they have a good home, another buyer will come along,” Myers says.

Sellers should get the home back on the market as fast as possible to avoid losing momentum. For Elizabeth Weintraub, broker associate at Lyon Real Estate in Sacramento, California, a property re-entering the market for any reason is best framed as a new listing.

That's because a listing with zero or very few days on market typically has a positive psychological effect on buyers, who consider it a hot property they should snap up before someone else does. But a home that's been on the market for months may give buyers the impression that it has significant issues, even when that's not true.

While multiple listing service rules differ throughout the country, Sacramento properties can be refreshed and listed with “zero days on market,” along with a separate ticker for cumulative days on market.

“All of a sudden, it makes the listing very attractive,” Weintraub says. “And you would be amazed how many homes sell. They could be on the market six months, and when you put them back as a new listing with zero days on market – bam, they sell.”

In other parts of the country, your listing agent may keep possible buyers in the wings with a backup offer during the due diligence process in case the deal fails. In Memphis, Tennessee, for example, it may make sense to mark a home as "under contract" while keeping options open, says Linda Sowell, owner and principal broker of Sowell & Company, a Memphis real estate firm.

“We usually don’t take [the home] off the market until we’ve gone through an inspection period and an appraisal period. We leave them on but reveal it’s under contract,” Sowell says, noting an addition to the yard sign or update on the online listing will mark the home as under contract.

Since it’s clear the seller and buyer are already in negotiation, Sowell says there are rarely showings for prospective buyers during the contract process. But it leaves room for communication, and interested buyers can keep an eye on the property in case it returns to the market.

[Read: What's Dragging Down the Value of Your Home?]

When the home doesn’t appraise for the sale price. The lender’s assessment can also prove problematic for a deal when the appraisal finds the home’s market value to be lower than the price set in the contract.

In this situation, there’s still a chance to salvage the deal. The buyer can come up with the difference between the appraisal amount and the sale price in cash. While this isn’t always possible, Myers notes it’s more common in hot real estate markets with bidding wars due to low inventory. A more likely scenario is for the seller to lower the price.

“I typically recommend the seller reduce his price to the appraised value so that they can close the deal. The reason is that if the home didn’t appraise the first time, there’s a good chance it’s not going to appraise the second time if you didn’t reduce the price,” Myers says.

If the deal doesn’t go through and you remain confident the property is worth more than the appraised amount, you can hire a separate appraiser to report on the property. This can help you determine the price of the property when you relist it. Still, there is always a chance the second appraisal will valuate the home at a lower-than-expected price.

Weintraub recalls a property she once listed for $1.2 million, but that appraised for $200,000 less. Weintraub and her clients believed the property’s market value was more than the appraisal value and hired another appraiser for a second opinion. The move proved fruitful, as the home sold for $1.1 million.

“We were able to split the difference that way. It was worth the $700 that they paid for the appraisal if they got another $100,000 out of the deal,” Weintraub says.

[See: 12 Home Improvement Shortcuts That Are a Bad Idea.]

When the home inspection uncovers problems. The home inspection portion of the due diligence process could reveal some unknown home defects, including a cracked foundation, mold or termite infestation.

In this case, Sowell says you have two options: “You either need to fix it, or you’re going to have to reveal it on your disclosures.”

A known defect is required by law in most states to be disclosed to buyers. If you don’t want to put in the time and effort to abate the problem, you’ll likely have to lower your asking price to entice buyers, as the property will be less appealing with work from the get-go. It's your choice whether to make the repair or leave it for the buyer, but you should weigh the cost of the repair with the amount you'll need to lower the asking price without fixing it.

Myers explains one advantage to forgoing repairs is that a lower price range draws a wider pool of buyers who may be interested in doing more work on the property they purchase: “I recommend they reduce the price to a price that will attract buyers that are willing to accept the home and the condition that it’s in.”

Tags: real estate, housing market, existing home sales, pending home sales, home prices, home improvements, mortgages


Devon Thorsby is the Real Estate editor at U.S. News & World Report, where she writes consumer-focused articles about the homebuying and selling process, home improvement, tenant rights and the state of the housing market.

She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.

Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at dthorsby@usnews.com.