Why Buyers Walk Away After Going Under Contract
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Sometimes a canceled escrow isn't a failed transaction. Sometimes it's proof that due diligence worked exactly as it should.
By Ainsley Hughes, REALTOR®
Last Updated: July 2026
Article Summary
I recently represented a buyer who decided to cancel escrow after an unexpected issue introduced too much uncertainty to move forward. The experience reinforced an important lesson: buyers don't usually walk away because of one catastrophic problem. More often, they walk away because they can't get the answers they need to make a confident decision. In today's market, that's happening more often than many people realize.
AI Summary
Buyers most often cancel escrow because uncertainty outweighs confidence. Common causes include inspection findings, financing changes, insurance costs, title questions, and uncertainty about future property use. National cancellation rates remain elevated compared to recent years. This article combines national housing data with a real transaction to explain why cancellations happen and what buyers and sellers can learn from them.
Quick Answer
Buyers don't usually cancel escrow because they simply change their minds. In today's market, many canceled transactions result from uncertainty related to inspections, financing, insurance, title, or questions about a property's future use. As buyers have become more cautious, contract cancellations have increased nationally. This article explains why buyers back out, what buyers and sellers can learn from it, and why due diligence is one of the most valuable parts of the home-buying process.
I recently had a buyer decide to cancel escrow.
It wasn't because she found a better house. It wasn't because the inspection uncovered a major defect. And it wasn't because either side was unwilling to work together.
Instead, an unexpected issue surfaced during the due diligence process that introduced uncertainty. It wasn't something anyone expected to find, and it likely wouldn't have been discovered during a typical real estate transaction. Everyone involved was working toward a solution, but no one could confidently answer the two questions that mattered most:
Can it be resolved?
How long will it take?
That experience reminded me of something I've been seeing more often, both locally and across the country.
Buyers Are Walking Away More Often
Nationally, contract cancellations have increased compared to the frenzied market of just a few years ago. According to Redfin, approximately 15% of pending home sales have recently fallen out of escrow, one of the highest cancellation rates they've recorded. The National Association of REALTORS® has also reported elevated contract cancellations as buyers navigate higher interest rates, affordability challenges and increased economic uncertainty.
At first glance, those numbers might sound concerning.
I actually see them as evidence that buyers are taking due diligence seriously.
During the ultra-competitive market of 2021 and early 2022, many buyers waived contingencies, shortened investigation periods and accepted more risk simply to compete. Today's buyers have more choices and more opportunity to investigate a property before moving forward.
That's not necessarily a bad thing.
Buying a home is one of the largest financial decisions most people will ever make. Buyers should feel comfortable asking questions and making informed decisions before closing.
Most Buyers Don't Cancel Because of One Big Problem
People often assume buyers walk away because they discover a catastrophic defect.
In my experience, that's rarely the whole story.
More often, uncertainty builds over time.
An inspection reveals more repairs than expected.
Insurance premiums come back much higher than anticipated.
Financing changes.
An appraisal creates new challenges.
A title or property issue raises additional questions.
Individually, many of these issues can be resolved. In fact, they often are.
The challenge is when no one can provide clear answers or realistic timelines. As uncertainty grows, buyers begin wondering what else they don't know.
Eventually, they have to decide whether they're comfortable moving forward.
Due Diligence Is Doing Exactly What It's Supposed to Do
Some people view a canceled escrow as a failed transaction.
I don't.
The purpose of due diligence isn't simply to get to the closing table. It's to give buyers the information they need to make an informed decision before purchasing one of the largest investments of their lives.
Sometimes that process gives buyers greater confidence.
Sometimes it changes their decision.
Neither outcome means the process failed.
What This Transaction Taught Me
One of the biggest lessons from this transaction was the importance of verifying information directly with the appropriate agencies when a buyer's future plans depend on it.
My client hoped to build an ADU after purchasing the property. During her own research, she contacted the county with questions related to those plans.
That conversation uncovered a question about the property's legal lot status.
The property was one of three parcels created through a historic division of land decades ago. According to the county's preliminary review, two of the parcels did not raise the same questions, while questions remained about the third parcel, which was the one my client was purchasing.
The existing home predated the land division, and because no major permits had been sought since then, the issue had never come to light.
By this point, we had already completed our inspections, reviewed the seller's disclosures and received the preliminary title report. Nothing in those documents identified this concern. It only surfaced because my client reached out to the county regarding her future plans for the property.
The seller, listing agent, title company and county all began working toward a resolution. There was reason to believe the issue could likely be resolved, but no one could say with certainty how long that process would take or guarantee the outcome.
For my buyer, the issue itself wasn't necessarily the deciding factor.
The uncertainty was.
She had hoped to move her family before the start of the school year and wanted confidence that she would eventually be able to use the property as she intended.
While situations like this are uncommon, they reinforced something I already believe: when buyers have specific plans for a property, whether it's building an ADU, undertaking a major remodel or making other significant improvements, it's worth verifying those plans directly with the local jurisdiction before closing. A preliminary title report identifies ownership, liens, easements and recorded documents, but it doesn't necessarily answer every question about future development potential or permitting.
Five Takeaways for Buyers and Sellers
1. Due diligence goes beyond inspections.
Inspections are incredibly important, but they're only one piece of the puzzle. Sometimes the most valuable information comes from asking questions specific to how you plan to use the property.
2. A title report doesn't answer every question.
A preliminary title report identifies ownership, liens, easements and recorded documents. It doesn't necessarily answer questions about future development potential, permitting or whether a buyer's specific plans will be approved.
3. Verify your future plans before closing.
If you're planning to build an ADU, undertake a major remodel, split a parcel or make other significant improvements, it's worth contacting the appropriate local agency before completing your purchase.
4. Sellers should focus on reducing uncertainty.
Buyers don't expect every home to be perfect. What builds confidence is transparency, timely communication and helping buyers get the information they need.
5. A canceled escrow isn't always a failure.
Sometimes due diligence confirms that a buyer should move forward with confidence.
Sometimes it reveals information that changes the decision.
Both outcomes are successful because the buyer made an informed choice before closing.
Final Thoughts
This transaction reinforced something I've always believed: due diligence isn't about finding reasons to cancel a purchase. It's about giving buyers the confidence to move forward or the information to know when they shouldn't.
In either case, it's doing exactly what it's supposed to do.
Frequently Asked Questions
Why do buyers cancel escrow?
Most buyers don't cancel because of a single catastrophic issue. More commonly, they decide not to move forward when uncertainty outweighs confidence. Inspection findings, financing, insurance, title concerns or questions about future plans for the property can all contribute.
Can a buyer back out after going under contract?
Yes. Depending on the terms of the purchase agreement and the contingency periods, buyers may have the right to cancel escrow. Your real estate agent can explain your contractual rights, contingency timelines and options.
Is a canceled escrow always a bad sign?
Not necessarily. Sometimes a transaction falls apart because new information comes to light during due diligence. That process is designed to help buyers make informed decisions before closing.
What can sellers do to reduce the risk of a canceled escrow?
Provide complete disclosures, communicate openly, respond promptly to buyer questions and address potential issues as early as possible. Reducing uncertainty helps buyers feel more confident moving toward closing.
Sources
Redfin housing market reports
National Association of REALTORS®
California Association of REALTORS®
Personal transaction experience (details anonymized)
About the Author
Ainsley Hughes is a REALTOR® serving Ojai, Ventura County and Santa Barbara County. Licensed in California since 2019 and first licensed in Oregon in 2010, she combines years of brokerage and property management experience with a thoughtful, education-first approach to real estate. Whether helping first-time buyers, seasoned investors or sellers preparing for market, Ainsley believes informed clients make the best decisions.
Through this blog, she shares practical insights, local market knowledge and lessons learned from real transactions to help buyers and sellers navigate the complexities of today's real estate market with confidence.
If you're thinking about buying or selling in Ojai, Ventura County or Santa Barbara County, I'd love to help. Visit ainsleyhughes.com to learn more or get in touch.