Why Are So Many Deals Falling Apart Before Closing?

Question

Most investors I've talked to lately have been saying the same thing. The market feels pretty bad right now. Deals are harder to get across the finish line, buyers seem more hesitant, and a lot of opportunities just aren't moving the way they used to.

I've also noticed quite a few loan deals falling through recently, which got me wondering if this is just what everyone is experiencing right now. Are you guys seeing the same thing?

Are deals slowing down? Are investors being more cautious? Is financing becoming harder to secure, or are people simply waiting for better opportunities?

I'd love to hear what everyone is seeing in their own markets. Maybe it's just the areas I'm hearing about, but it feels like things have been pretty quiet lately.

How's the market treating you these days?

Dan Worth · Answer

On the off-market side, a lot of what I see fall apart is title, not financing. Distressed properties often come with back taxes, judgment or municipal liens, an open foreclosure case, or an owner who passed away without the estate being settled, and none of that surfaces until the title search comes back weeks into the deal. Checking the county's tax, lien and court records before signing catches most of it early, so you can price it in or set a realistic timeline from the start. Tighter lending makes it worse, since there's less room in the numbers to absorb a surprise payoff.

Ryan Brown · Answer

Deborah, I was curious about this too, so I pulled the listing history for our Louisville MLS. It covered every residential listing since 2021, a little over 100,000 of them. I counted every contract that went back on the market after going Pending or Under Contract.

At least locally, the data shows the opposite of what it feels like. Fewer deals are falling through, not more. To compare the same months each year, I looked at January through July. The fall-through rate peaked at about 14.4% in 2023 and has dropped every year since, to about 12.1% in 2026. That's roughly one in seven contracts falling apart three years ago and one in eight now.

The national picture looks different. Redfin reported about 14.5% of deals falling through nationally in September, near a record high. So I think a lot depends on your local market and the type of property you're looking at.

My guess for why Louisville has improved is that, like Ashish said, buyers are doing more of their homework before they write the offer. With homes sitting longer, people have time to get insurance quotes, check the numbers and negotiate before going under contract, instead of finding the problems during the option period.

The market can still feel slow, though. We're seeing homes sit longer here, too. But slower deals and dead deals are two different things. The deals that do get under contract seem to be closing more often than they were a few years ago.

Jaron Walling · Answer

More and more buyers are using A.I bots to run the numbers and when the math isn't mathing the deal falls apart. A large part of society is using these tools to the detriment of the economy (environment?) whether they believe it or not.

A lot people can't justify buying vs. renting and I don't blame them. When 15 items at the grocery store costs $190 people stop buying stuff.

Most experienced investors have been running conservative since rates shot up, and got even tighter when the Iran war started.

Michael K Gallagher · Answer

Its basically been a grind in my market for a couple years now, but there is a definite slowdown in overall velocity. But the general housing demand still seems pretty strong, just anecdotally from the leasing we are doing, even going into the holidays. just a matter of finding the assets and price ranges that are still in demand.

Adam Summerer · Answer

On the financing side the ones I see die late are usually insurance and appraisal. Insurance quotes come back higher than what the buyer modeled, which pushes the payment up and on a DSCR loan can knock the ratio under the lender's minimum a week before closing. Then appraisals coming in light on the flips and small multis. Getting a real insurance quote and a rough rent/value check before you're in contract saves a lot of these.

Ashish Acharya · Answer

Deborah, I've been seeing more investors take a much harder look at the numbers before getting to the closing table.

I think part of it is financing, but part of it is that investors are underwriting more conservatively than they were a few years ago. Higher debt costs, insurance, taxes, and operating expenses can make a deal look very different once everything is actually modeled.

From the tax side, I also think investors are becoming more careful about treating projected depreciation or appreciation as a reason to make a deal work. Those can improve the overall return, but they shouldn't be what rescues a deal that doesn't make sense on its operating numbers.

It'll be interesting to see whether this is mostly a financing issue or whether we're simply seeing investors become more disciplined about what they'll buy. Happy to connect!

Why Are So Many Deals Falling Apart Before Closing?

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