Buying a Claremont Home That Already Fell Out of Escrow

A house you liked disappears from the active list, and a few weeks later it is back. The status says the sale did not complete. Most buyers react in one of two unhelpful ways: they assume the house is damaged goods and skip it, or they assume they have found a bargain nobody else wants and rush in.

Both reactions skip the only step that matters, which is finding out WHY. A deal can die for reasons that have nothing to do with the property, and it can die for reasons that would end your purchase too. Those are very different situations and they are usually distinguishable with a few direct questions.

The reasons that have nothing to do with the house

Financing is the most common. A buyer's loan did not come together, employment changed, funds did not arrive, an underwriter asked for something the file could not produce. None of that says anything about the property.

Contingent sales are another. A buyer who had to sell their own home first can be undone by their own transaction failing somewhere else entirely.

Then there are the human reasons. Cold feet. A job relocation. A family change. Two co-buyers who stopped agreeing. These happen, they are nobody's fault, and they leave the house exactly as it was.

The reasons that ARE about the house

An inspection turned up something the buyer would not accept. The appraisal came in below the contract price and nobody would bridge the difference. The preliminary title report showed something unresolved. An insurance carrier declined the address, or quoted terms the buyer could not live with. A permit history question surfaced. An association document review changed the buyer's mind.

Any of those is a real signal, and the same issue is likely to meet you.

It is not automatically disqualifying. Plenty of houses fall out for a problem that is fixable, or that a different buyer with a different loan or a different plan simply does not have. But you want to know which one you are dealing with before you write, not during your contingency period.

How to actually find out

Ask, in writing, through your agent. Sellers are not obliged to narrate the history of a failed deal, but many will, and the request itself is reasonable.

Ask whether any inspection reports exist from the prior escrow and whether the seller will share them. This is the single highest-value question, because it can hand you a professional's report on the property for free. Read it as information rather than as gospel; you will still order your own.

Ask whether an appraisal was completed and what happened with it. A seller will not always answer, but a low appraisal in a prior escrow is something to think about before you decide what to offer.

Ask whether any new disclosures have been added since the last listing period. A seller who learns something material during a failed escrow generally has to disclose it going forward, so compare the current packet against what was published earlier if you have it. How to read that packet properly is covered in what a Claremont seller's disclosure packet is really telling you.

Ask whether repairs were made in response to the last buyer's requests, and if so, whether they were permitted and by whom.

What the listing history does and does not tell you

A returning listing usually shows a new marketing period, and buyers read that as a fresh start. It is worth looking past the headline. Ask how long the property was on the market before it went into escrow the first time, how long it sat in escrow, and whether the asking price has moved since. A house that went into contract quickly and failed on financing is telling you a very different story from one that sat, found a single buyer, and then lost them over an inspection. Neither number is a verdict on its own, but together they usually point at which questions to ask first.

Do not assume the price is soft

The reflex is to treat a returning listing as a discount waiting to happen. Sometimes there is a genuine willingness to move on terms. Often there is not, especially where the failure was a financing problem on the other side and the seller believes the market has not changed.

Judge the price on what comparable properties support and on what the property is worth to you, exactly as you would with any other listing. Let the reason for the failure inform your TERMS more than your number. A seller who has just lost a deal to a shaky loan will care a great deal about the strength and documentation of yours, and that is where a serious buyer has real leverage. The mechanics of building that kind of offer are in writing a winning offer on a Claremont home.

Protect yourself the ordinary way

Whatever you learn, do your own investigation. Order your own inspections rather than relying on the prior buyer's reports. Quote insurance on the address early. Pull the permit history yourself. Read the title report and the underlying recorded documents.

Keep your contingencies in place while you do it. A returning listing is precisely the situation where a buyer feels pressure to look decisive by stripping protections, and precisely the situation where those protections may earn their keep.

The short version

Back on market is a data point, not a diagnosis. Find out whether the last deal died because of the buyer, the money, or the building. If it was the buyer or the money, you may be looking at a straightforward purchase with a motivated seller. If it was the building, you now know what to investigate first, and that is a genuine advantage over everyone who is guessing.

More buyer guides are in the buying a home hub.

Anthony Grynchal has been licensed in California since November 2009.