Short Answer
If the buyer's financing falls through at closing, the deal typically cannot proceed unless the buyer can pay cash or find alternative financing quickly. If the contract has a financing contingency, the buyer can walk away and get their earnest money back. If the buyer waived the financing contingency, they risk losing their earnest money and could potentially be sued for breach of contract. Sellers can then relist the property and accept backup offers.
Financing falling through at the last minute is one of the most stressful scenarios in real estate. It can happen for several reasons: the buyer loses their job, the lender discovers a problem with the buyer's credit or documents, the appraisal comes in too low, or the loan program changes at the last minute. If the contract includes a financing contingency, the buyer is protected. They can terminate the contract and receive their earnest money deposit back, provided they acted in good faith to obtain financing. If the buyer waived the financing contingency, the situation is more serious. The seller may be entitled to keep the earnest money as damages. The seller could also sue the buyer for specific performance, forcing the buyer to complete the purchase, though this is rare. The most common resolution is to extend the closing date to give the buyer time to find alternative financing or resolve the issue with their lender. A cash buyer or a private lender may be an option. In some cases, the buyer and seller negotiate a mutual release of the contract to avoid legal complications.
Bob's Advice
Redfin Senior Agent · AI Certified Agent
Financing falling through at closing is rare, but it does happen. This is exactly why I recommend keeping your financing contingency in place. It protects your earnest money if something goes wrong with your loan. If you are concerned about financing risk, let us talk about your options before you make an offer. I will help you choose a lender with a strong track record of closing on time.
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