Common Reasons For Real Estate Contract Cancellations

Contract cancellations
Both buyers and sellers should be aware of likely pitfalls with real estate transactions.

As the real estate market has turned from a seller’s market to a buyer’s market over the past 15 months or so, we have seen a rise in contract cancellations. Whether you are a buyer or a seller, it is important to remember that even after you have an executed contract, there are many potential pitfalls that can lead to contract cancellations. We discuss some of the most common reasons below.

Common causes for contract cancellations

  • Home inspection items: Of course, one of the most well known reasons for contract cancellations involves the home inspection. While a home may appear to be in great shape, it is not uncommon for a home inspection to uncover some serious and costly defects with a property. Assuming the seller is unwilling to repair the items or offer a credit to cover the repairs, the buyer may likely back out of the contract.
  • Financing issues: With credit requirements tightening, it is very possible that the buyer may encounter issues with any financing contingencies with the transaction. The result will be a lender that is unwilling to loan the money for the transaction.
  • Issues with a property’s title: In order for a property to be conveyed to a buyer, there must be a clear title. If a property does not have a clear title, then the lender will not approve the mortgage. Needless to say, the deal will stop in its tracks.
  • Low appraisal: When obtaining a mortgage, the lender will order an appraisal on the property. This is done to confirm that the lender is not approving an amount of money that is higher than what the property is worth. With the meteoric rise in home prices over the past few years, it is not uncommon for home appraisals to come in under the sales prices. When this occurs, it is referred to as an appraisal gap. Assuming the buyer is unwilling or unable to pay for the difference in the appraisal value and sales price, the deal is likely to fall apart. Of course, another option is for the seller to reduce the sales price to the appraised value.
  • Inability to obtain property insurance: The inability to obtain property insurance has become an even greater reason for contract cancellations throughout South Florida over the past few years. In particular, we are seeing insurers backing away from insuring properties with older roofs.


In closing, it is important for both buyers and sellers to do everything they can to properly prepare for a real estate sale. As a buyer, it is important to have your finances in order to ensure that you are able to obtain a mortgage. As a seller, it is critical that you have your property in good condition to avoid any inspection related items during the inspection period.

Do you need assistance with either buying or selling a home in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search app for your smartphone or tablet.

By natasha moore

REALTOR® with Live South Florida Realty, Inc.