How Often Do Buyers Back Out After Inspection?

An inspection is a critical part of the home buying process. It allows buyers to identify any issues or needed repairs in the home before finalizing the purchase. However, inspections can also lead buyers to back out of a deal if serious problems are uncovered. So how often does this really happen?

How Often Do Buyers Back Out After Inspection?

According to some industry professionals, around 1 in 10 home sales fall through after the inspection. This statistic can vary regionally and depend on factors such as the age of the homes in the area. But nationally, about 10-15% of buyers decide to walk away from a purchase contract because of inspection findings. However, a survey by NAR found that 25 percent of terminated deals fell apart due to issues revealed during the home inspection.  Part of this discrepancy may be due to seasonal and economic trends.  During times when buyers are more skittish and wary of purchasing a home, they are more likely to back out generally.

There are a few key reasons buyers may back out after an inspection:

1. Major Repairs Needed

Inspections often reveal defects in the home that require costly repairs, such as a failing roof, outdated electrical system, foundation cracks, or other structural issues. While buyers expect minor fixes, major repairs can be a deal-breaker – especially if the seller is unwilling to fix the problems or offer a credit. A roof replacement alone can cost $10,000 or more.

2. Safety Concerns

Inspectors check for safety hazards like exposed electrical wiring, mold, asbestos, lead pipes, and more. If serious hazards are found that compromise safety or habitability, buyers often decide the home is not a good choice for their family. The high cost to remediation for these items is often a deterrent for buyers.

3. Pest Infestations

Termites, cockroaches, mice and other pests are common inspection findings. Pest control and extermination can be expensive and are not always effective. Buyers may not want to take on these problems.

4. Poor Flips or Remodels

With house flipping becoming more common, buyers are walking away when inspections reveal shoddy or improper work in a remodeled home. Poorly constructed flips often require repairs that buyers don’t want to handle.

5. Homes Misrepresented by Sellers

In some cases, sellers deliberately hide defects from buyers. If the inspection uncovers serious undisclosed problems, buyers will feel deceived and move on. Sellers who lie or cover up issues often lose the deal.

6. Last-Minute Cold Feet

For some buyers, the inspection gives them cold feet about moving forward. Even minor issues can be enough reason for a buyer to back out if they are already questioning the purchase. Inspections add a reality check.

7. Deal-Breaker for Buyer’s Finances

The cost of repairs and closing costs together may bust the buyer’s budget. If the buyer can’t afford to move forward, the sale falls through. First-time home buyers are especially at risk here.

In Summary

While 10-15% is an average statistic, in hot markets with bidding wars, buyers may be less likely to walk from an inspection. When inventory is low, buyers compromise more often to get the home. But in general, buyers still rely on the inspection findings to make their decision.

If you are selling your home, preparation is key. Take care of any repairs upfront to avoid issues found during the inspection. Be upfront about any existing problems in the home. And during negotiations, be open to credits or price adjustments if unexpected defects do turn up. With the right prep work and reasonable expectations, your sale should smoothly pass the inspection phase.