When your escrow cancels
Encouragement for sellers, buyers, agents, and loan officers
We often use the analogy that real estate transactions are like roller coaster rides with emotional highs and lows. Possibly the biggest low for all involved is a cancellation. Just as with roller coasters, your level of nausea and stress may vary.
Initial reactions
If you’re the seller: You’re disappointed; you thought the buyer was all in. You had already started preparing—mentally, emotionally, and logistically—for your move and next chapter. You’re mustering up the energy to start over again and not lose hope.
If you’re the listing agent: It’s back to the drawing board scheduling open houses and answering inquiries—including why the first buyer cancelled. You’re hopeful for a new offer from a more committed and enthusiastic buyer. You worry for your seller’s situation.
If you’re the buyer: You were so hopeful this was the home you’ve been searching for. Whatever your reason for canceling, it wasn’t meant to be. You’re sad and disappointed, but maybe somewhat relieved. You don’t know if or how long until you can find another good home in your budget.
If you’re the buyer’s agent or loan officer: You’re 100% supportive of your client’s decision to cancel; of course you want what they want. But you wonder how long it will take for your buyer to find another home.
How to move forward
After the initial shock of a cancellation, everyone involved needs encouragement. Here are some ideas to help each side rally and start again.
For sellers and listing agents:
· Listing agents, try to learn more about why the buyer cancelled. I had a case where the buyers used a contractual contingency to cancel, but didn’t elaborate further. I circled back to the buyer’s agent and learned one spouse hadn’t been 100% on board with the home from the beginning, but went along with submitting the offer. During escrow, this spouse finally voiced their hesitation about the long commute.
· If, like the case above, the reason was subjective to the buyer and not anything about the home, listing agents can report this when asked the reason for the cancellation. But if the cancellation stems from a new finding about the home, sellers and listing agents must truthfully disclose. Take heart, what bothered the first buyer may not be a deal breaker for the ‘right’ buyer.
· Listing agents, schedule a debrief call or meeting with your seller to give them a chance to work through their questions and reactions to the cancellation. Regroup and rally as a team.
· Listing agents, have your sellers already started moving? Are their overhead costs mounting? What have you learned about your seller through this latest chapter? How can you offer help and compassion at this juncture?
· Sellers, if you are feeling weary or uncertain about going back on the market, or about selling in general, have a heart-to-heart talk with your agent to help you sort out possible options and what might be best for you. Discuss any timing or budget concerns with your agent.
· Review the current comps: are there any new sales that have shifted the market? Discuss your list price strategy, especially if you’ve discovered any new disclosures or will be making improvements.
· If you’ve learned new information about the property during this cancelled escrow, consider possible improvements or repairs. A short period off market to make these upgrades may allow for an even better second debut of your listing.
· Before you go back on market, take another look at your listing photos and description—can anything be updated or refreshed? Check over your seller’s disclosure statement and make any necessary updates.
Sellers and listing agents, the “days on market” clock is ticking. After debriefing, put the cancelled escrow behind you and move forward with renewed energy and enthusiasm to find the right buyer!
For buyers, their agents, and loan officers:
· Buyers, it’s natural to get attached to a home, so go easy on yourself as you mourn the loss of the cancellation. You may spend some time sorting through your feelings. If you need to take a break, share this with your agent.
· Buyers, has this recent experience changed your needs and wants for a home? Has your budget changed? Ask your agent to adjust your search criteria—a new crop of listings may come up that you haven’t seen. There also may be listings that came on the market during your escrow that you didn’t bother seeing.
· Agents, what have you learned about your buyer that you can apply as you work with them going forward? Schedule a debrief call or meeting with your buyer. Come prepared to comfort and listen to your buyer.
· Loan officers, this is a great juncture to reconnect with the buyer to review or revise their budget. Have rates changed? Are there any new loan programs they might qualify for?
· Buyers, remind your agent of your circumstances: have you given notice to your landlord? Do you have a deadline to find a home? Do you need to discuss alternate plans?
Buyers, buyer’s agents, and loan officers: once you and your dream team have regrouped with newfound wisdom and united energy, get out there and look at more homes!
Lessons Learned
A seller and I were hit with a cancellation just a day into escrow. It turned out the buyer had not reviewed the mortgage Good Faith Estimate before submitting the offer to us. After we accepted, the buyer saw the larger-than-expected monthly payment, got nervous, and backed out. Shame on the buyer’s agent and loan officer for not managing this ahead of time; shame on me for assuming this had been done. Thankfully, my seller got a better offer soon after, but I and the buyer’s side learned an important lesson.
In our current high price, high interest rate environment, many cancellations are happening for the same reason, even when the buyer is fully aware up front of their loan payments. As the realities of homeownership costs sink in during escrow, buyers are seeking larger concessions and credits—which are possibly better than a cancellation, depending on the seller.
Stakes are high when dealing with possibly “the biggest purchase in your life.” Sometimes, it’s not a matter of “if,” but “when” you might experience a cancellation. It’s a bummer for sure, but don’t give up!
A cancellation is an opportunity to learn and course-correct. All involved gain experience for the next time. All involved walk away with new knowledge about the buying or selling process—or themselves. Cancellations are never a waste.
One of life’s biggest lessons is how to maturely deal with disappointment. May God comfort you as you pause to look inward and grow from this experience. Then may God refuel your tank so you can forge ahead again!
Do you have a learning to share from a cancellation you went through? Please comment!
Philippians 4:6 (The Message)
Don’t fret or worry. Instead of worrying, pray. Let petitions and praises shape your worries into prayers, letting God know your concerns. Before you know it, a sense of God’s wholeness, everything coming together for good, will come and settle you down. It’s wonderful what happens when Christ displaces worry at the center of your life.
Some of the encouragement here for sellers and buyers is taken from my upcoming book, Faith Lessons for Home Sellers and Buyers. Some of the encouragement for agents is taken from The God Layer: Faith Lessons in Real Estate, Chapter 4-8, “When an escrow cancels.” If you’re a real estate agent and would like a free copy of this chapter, please message me and I’m happy to send it to you!