How to Avoid Real Estate Escrow Cancellations

Uncertainty seems to be the word on everyone’s lips when it comes to the economy and the real estate market lately. Buyers are dancing around mortgage rates hoping they’ll drop, while sellers are holding off for a better market or lower prices if they need to move now.

Even for those sellers fortunate enough to get a contract signed and into escrow, cancellations have been more common this year than in recent years.

According to Business Insider, more than 15 percent of home-purchase agreements fell through in July 2025. Cancelled home-purchase contracts were especially high in markets that recently saw Covid-booms. The San Antonio metro area experienced the highest rate of cancellations in July, with nearly 23 percent, followed by Fort Lauderdale at 21 percent, and Jacksonville and Atlanta at almost 20 percent.

At the time of writing, the federal government shutdown is also leading to cancelled contracts, as FHA and VA loans can’t be funded and some government employees are going unpaid.

In a balanced or buyer’s market, a “back on market” status can trigger buyer hesitation, extend days on market, and often force price adjustments. Helping sellers avoid those risks is one of the most valuable roles you play as their real estate agent.

While uncertainty remains, there are still strategic moves you can make to help your sellers overcome challenges and get their closings to the finish line.

Challenge 1: Financing or Loan Falls Through

Financing issues are one of the biggest causes of residential contract cancellations. Buyers may be pre-approved, but changes like their job, credit score, debt limits, lender underwriting, etc. can cause final approval to fail. Unprepared buyers and sellers can quickly back out instead of working toward a successful closing.

Solutions:

Before accepting a contract, be sure to ask the buyer’s  agent if the buyers are fully underwritten or conditionally approved, not just pre-approved. Ask if the buyer has been advised against major financial changes during escrow, like changing jobs, applying for new credit, or incurring large debts.

Call the buyer’s lender directly and have a conversation about what safeties they have in place if financing issues arise. Throughout escrow, check in with the lender often and communicate clearly about deadlines and expectations. Monitor finance contingency deadlines that are enforceable and trackable.

It may also be helpful to talk to the buyer’s agent about other pre-approvals. A buyer who has a pre-approval or conditional approval with more than one lender could be helpful – if one lender fails to close another may be able to step in quickly and still close the loan with different resources.

Challenge 2: Inspection or Repair Surprises

Many avoidable cancellations occur during home inspections when issues surface that cannot be easily resolved. Buyers in today’s market can be skittish about repairs and are quick to walk away from concerns instead of negotiating pre-closing remedies.

Solutions:

These problems are “avoidable” in many cases because sellers can pre-inspect their home before listing. A pre-inspection reveals any large obstacles early and allows the seller to control repairs on their own timeline.

Additionally, a pre-inspection is an asset to the home sale, showing buyers that the sellers are sure of the product they’re selling. As the listing agent, keep repair receipt copies and provide this to prospective buyers with the pre-inspection. Buyers will feel confident about recent work and have a vendor to call with any questions.

If the pre-inspection uncovers a repair that’s too large for the seller to handle (like foundation repair or cast iron pipe replacement), you may consider offering the buyers one to two repair quotes and closing credits that match the estimated cost. And remember, disclose, disclose, disclose!

Challenge 3: Appraisal or Valuation Discrepancies

In a market with a low volume of sales, there may be a smaller number of similar, comparable properties to draw value estimates. This causes problems for real estate agents trying to help their buyer make an offer and appraisers trying to value property for the lender. When an appraisal comes in low, the buyer has a few options: buyers can bring extra cash to closing, renegotiate the contract, or cancel.

Solutions:

As the listing agent, find and use strong, recent, comparable sales to list the property appropriately and prompt realistic offer prices. Once in escrow, be sure to share these comps with buyers’ agents, the lender, and – when allowed – the appraiser.

If you fear there may be an appraisal issue, use your local MLS or board’s appraisal contingency addendum to encourage renegotiation instead of an immediate cancellation. Keep communication open between you, the cooperating agent, the lender, and the title company during the appraisal process.

When you’re in a seller’s market, try to avoid overbidding or “bidding wars” that aren’t backed up by recent comps.

Contract cancellations can cause big headaches, but can be avoided with the right process in place. By maintaining good records, inspecting proactively, and keeping communication high between all parties, you as the real estate agent can reliably bring a property from list to close!

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