So you heard it on TV before. What makes a deal fall out of escrow or fall apart or make the transaction not go through? Well, there are multitude of reasons that a deal might fall apart in real estate. But today we're going to focus on the three reasons related to financing that a deal may actually fall apart. When I say financing, I'm talking about the buyer's ability to get a loan for their home that they're going to purchase. And there are really three reasons in the financing contingency the deal may fall apart.

Now these could vary from state to state, but here in Washington, the first reason that it might fall apart is that the buyer has applied for a loan or a mortgage to get the home that they're in contract for. But then they're actually not able to obtain that loan that they thought they could get. So even though buyer is pre-approved at the beginning of the process, once they get into the underwriting, after they're in contract on the home, that loan may not get approved by the underwriter. And that can cause the buyer to actually have to back out of the contract because they can't get financing anymore. They can't get the loan that they applied for. So that may make a contract actually fall apart or it fall out of escrow.

The second reason that a contract may fall apart is because in the financing contingency, the seller is actually entitled after a certain number of days to serve a notice to the buyer asking them for an update on the loan. Now after that notice is requested by the seller, the seller also has another time period in which they can actually request to terminate the agreement. Now this doesn't happen a lot, but sometimes it can happen if a buyer is dragging their feet or not giving the seller the updates that were requested. And so the seller can actually terminate the agreement after a certain number of days based on the financing contingency. That's number two.

Now number three is all related to the appraisal. So the appraisal is part of the financing process. When a buyer gets a home loan, their bank has to do an appraisal on the property to make sure that it's worth the value they're willing to pay. So let's use an example. If a buyer made an offer for $400,000 and the appraisal didn't come in at $400,000 or higher, maybe it came in at $390,000, the buyer could actually back out of that offer or that contract and get their earnest money back. And that would be a reason that the contract might fall apart or the home might fall out of escrow. The buyer also has an option here to renegotiate with the seller, but if they can't come to terms and renegotiate a new price, then the buyer can still back out and get their earnest money back.

So those are just three reasons related to financing that a contract may fall apart and a home may fall out of escrow and go back onto the market. Obviously, there are a lot of other reasons that a contract could fall apart and we'll go over more of those in future videos. Thanks for tuning in. If you have any questions about financing or how a contract can fall apart, don't hesitate to reach out. You can always reach us and we look forward to helping you buy or sell in the Seattle area when you're ready. Don't forget to like, subscribe and comment on our videos. We'd love to have you engage and we're happy to answer any questions that you might have. Thanks so much. We'll see you again next week.