Things that can go wrong in a Real Estate contract- and how to prevent them

The following information was gathered from a recent presentation I did for my business network.

When in doubt, read the contract.

We will cover:

  • Personal Property
  • Earnest Money Deposit
  • Financing- Interest Rate and type of loan
  • Closing costs
  • Appraisal
  • Loan Application
  • Settlement Date
  • Home Inspection- radon, chimney, mold
  • Septic/Well/WDI inspection

More problems include:

  • Home warranty
  • Acceptance Period
  • Title Search
  • Lead-based Paint addendum
  • HOA packet



#1 Cause for contract to fall through:

The dreaded home inspection!

Paragraph 14 of the contract

When the seller grants the purchaser the right to a home inspection, those first days are stressful.  

A home inspection can include: engineering inspections, radon gas, underground storage tanks, soil condition and environmental testing.

Within the time specified after ratification, the purchaser is responsible at their expense to gather information from all or some of these inspectors.  Their agent writes up a Repair Addendum with a list of any LATENT DEFECTS that arise during the inspections.  The addendum and reports must be submitted during that specified time.  The Negotiation Period begins from that time and both parties have 7 days to agree to repairs.  If no one agrees, the purchaser has 2 days to decide if they want out of the contract.

#2 Cause for contract to fall through:

The appraisal

Paragraph #4

In most cases the purchaser will want to select that the sale is subject to the appraised value equaling or exceeding the Purchase Price.

When the appraisal is delivered to the Purchaser and the appraisal is less than the contract price, the Purchaser can walk away.  

The seller and purchaser can negotiate, but this is a very common problem when sales fall through.

My most asked question is “Will I get my money back if the contract falls through?”

  • Paragraph #6
  • Yes, if you follow the contract
    • If the appraised value is less than the contract price and no agreement is made
    • If the purchaser makes diligent effort of loan application but cannot receive financing
    • Seller is unable to cure title defects and unable to close 10 days after original settlement date
    • If Seller and Purchaser cannot agree on repairs from Property Inspection
  • No, if you are able to prove the defaulting party did not follow the contract
    • If Purchaser fails to deliver deposit in time
    • If Purchaser causes damages to Seller

Personal Property

Paragraph #2

  • Always include any items you would like to include in the sale of the property
  • Even if items are listed in the Multiple Listing Service, they are not part of the contract if they are not listed on the contract
  • Most lenders will ask you to remove the items from the contract- this can hold up a property from closing on time because the purchaser and seller cannot agree
  • To prevent the lender issue, your real estate agent should include a Bill of Sale with the offer


Paragraph #4

If the sale is subject to financing, the type of financing, interest rate, years of amortization, discount points and closing costs must be provided according to the information you receive from your lender.

If the sale is subject to financing and the purchaser is unable to obtain the type of financing they made the agreement for, they are able to get out of the contract.

It is very important to fill in all of the blanks and be specific as possible.

The Seller can also get out of the contract if you do not follow the provisions.

Mechanic’s Lien

Paragraph #13

  • If a seller has had work done to their home to prepare it for sale and has not paid a contractor, the contractor can file for a lien on the home.  
  • If it is filed after settlement, it is strongly recommended to contact legal counsel.  
  • These cases are known to have held up closings on numerous occasions.

Seller, Well and WDI Inspections

Paragraph #22

  • Seller is responsible for ordering these inspections if they are requested in a contract.
  • The WDI- Wood- Destroying Insects inspection covers the termite inspection, which must be ordered within 30 days of closing.
  • If either of these inspections reveal defects, the seller is responsible for fixing them.  If they do not fix the damage up to $1000 of the cost, the purchaser can terminate the contract.

Final Walk-Thru

  • A final walk-thru is typically scheduled a couple of days or the day before closing.
  • The final walk-thru is the time for the purchaser to verify that repairs from the repair addendum are completed.
  • It is also the time to make sure the home is in the physical condition it was in at ratification.
  • The property must be delivered in “broom-clean condition”.
  • All appliances, heating and cooling equipment, plumbing systems and electrical systems will be in working order at the time of settlement
  • If the home is not in the property condition, most Selling Agents will advise their clients NOT to close