How We Win Due Diligence for Home Sellers (When Most Deals Fall Apart)

Sarah thought she had won.

Full-price offer. Pre-approved buyer. Clean contract. She signed the papers on a Tuesday and immediately called the movers—$3,500 deposit, non-refundable.

By Friday, she'd put earnest money down on her next home. She took unpaid leave from work to coordinate the move. Her kids started saying goodbye to their school. Everything was on track.

Then, two days before closing, her phone rang.

"I'm sorry," the title officer said. "The buyer's loan was denied. The deal is off."

Sarah lost her backup home. She paid double housing costs for two months. She had to relist her property and start over. The "pre-approved" buyer who seemed rock-solid never qualified for final approval.

This isn't a rare story. In December 2025 alone, homebuyers canceled deals at the highest rate on record—15.7% of all pending sales fell through. Over 60,000 contracts nationwide collapsed after sellers had already committed time, money, and plans to the transaction.

The problem? Most sellers assume "under contract" means "done deal." It doesn't. Between offer acceptance and closing lies a 30-to-45-day gauntlet called due diligence—and it's designed to filter out buyers who can't actually complete the purchase.

The Brenkus Team developed a structured verification system to catch financing problems early, manage timelines with precision, and reduce the surprises that derail deals. This guide explains how due diligence works, why transactions fail during this phase, and what sellers can control to lower their risk.

What Is Due Diligence in Real Estate?

Plain-Language Definition

The due diligence period is a contractual timeframe—typically 7 to 30 days after offer acceptance—during which the buyer verifies financing, inspects the property, reviews title documents, and confirms the home meets their lender's requirements. Contingencies built into the contract allow the buyer to cancel or renegotiate if material issues are discovered.

This phase exists to protect both parties. Buyers get time to confirm the property is sound and their financing is solid. Sellers get to test whether the buyer can actually close. According to the National Association of Realtors, contingencies are the legal "exit ramps" that allow buyers to walk away without penalty if conditions aren't met.

For sellers, due diligence is not a formality. It's a risk filtration system. Every buyer claim—pre-approval, funds availability, employment stability—gets tested against real-world regulatory standards and lender requirements during this window.

The Due Diligence Timeline: What Happens After Offer Acceptance

Days 1–3: Contract Execution and Initial Disclosures

The buyer deposits earnest money into escrow. The seller provides mandatory disclosures: property condition forms, lead paint notices (for homes built before 1978), HOA documents, and any known defects. Late or incomplete disclosures can trigger cancellation rights or legal liability later.

Days 3–10: Home Inspection and Appraisal Ordered

The buyer schedules a licensed home inspector. The lender orders an appraisal to confirm the property's market value supports the loan amount. Sellers must provide property access with reasonable notice—typically 24 hours.

Days 10–17: Inspection Results and Repair Negotiations

The inspector delivers a detailed report, often flagging 50 to 200 items. Most are minor (loose handrails, caulking gaps), but major findings—foundation cracks, roof damage, HVAC failures—can trigger repair requests or cancellation. Inspection contingencies give buyers the right to walk if the seller refuses repairs.

Days 14–21: Appraisal Delivered

The appraiser determines whether the home's value matches the contract price. If the appraisal comes in low, the buyer can request a price reduction, increase their down payment to cover the gap, or cancel the contract under the appraisal contingency.

Days 21–30: Mortgage Underwriting (The "Black Box" Phase)

This is where most late-stage failures happen. The underwriter reviews the buyer's employment history, credit report, bank statements, tax returns, and debt-to-income ratio. According to Realtor.com, financing issues account for the majority of transaction failures during due diligence.

The underwriter may request additional documentation—pay stubs, letters of explanation for credit inquiries, proof of gift funds, employment verification letters. Every request adds time. Every delay increases the risk that the buyer's financial situation changes before closing.

Days 30–35: Final Loan Approval ("Clear to Close")

The lender issues a Closing Disclosure (CD), a federally mandated document that details the final loan terms, interest rate, monthly payment, and closing costs. Under Consumer Financial Protection Bureau (CFPB) rules, buyers must receive the CD at least three business days before closing. This waiting period is non-negotiable.

Days 35–45: Final Walkthrough and Closing

The buyer conducts a final walkthrough to confirm the property's condition hasn't changed since the inspection. Title transfers, funds disburse, and keys are handed over—if nothing goes wrong.

Why Do Pending Home Sales Fall Through?

Research consistently shows that transactions fail for predictable reasons. While exact percentages vary by market and year, the most common culprits are:

1. Financing issues – The buyer's loan is denied or delayed due to employment changes, new debt, credit problems, or income verification failures.
   
   
2. Low appraisal – The property appraises below the contract price, and the buyer cannot or will not cover the difference.
   
   
3. Inspection findings – Major defects are discovered, and the seller refuses repairs or credits.
   
4. Buyer circumstances change – Job loss, divorce, relocation, medical emergencies, or cold feet derail the purchase.
   
5. Title issues – Unresolved liens, boundary disputes, easements, or ownership clouds prevent a clean transfer.
   

Financing problems dominate this list. A buyer who seemed qualified at offer acceptance can lose approval weeks later due to underwriting scrutiny or last-minute financial changes.

How Financing Issues Surface Late (And Why They Derail Deals)

The "Pre-Approval" Misconception

Pre-approval is not final approval. It's a preliminary assessment based on the buyer's stated income, a snapshot of their credit report, and estimated debt levels. Freddie Mac's mortgage guide makes it clear: lenders perform extensive verification during underwriting that can uncover discrepancies, income gaps, or debt the pre-approval didn't catch.

Why Underwriting Takes Weeks

Conventional loans must meet Fannie Mae or Freddie Mac guidelines. These standards require written verification of employment, documentation of all income sources, explanation of large deposits, and confirmation that the buyer's debt-to-income ratio stays within limits. If the buyer is self-employed, the lender may request two years of tax returns and profit-and-loss statements.

Every document must be reviewed, verified, and approved by the underwriter. If something doesn't match—pay stubs show declining income, bank statements reveal undisclosed debt, tax returns contradict W-2s—the underwriter requests clarification. Each round of questions adds days.

Common Last-Minute Surprises

Buyers often make financial moves during escrow that sabotage their approval:

• They finance a car or open a new credit card, increasing their debt-to-income ratio.
  
• They change jobs, requiring the lender to re-verify employment and income stability.
  
• They move money between accounts without documenting the source, triggering fraud concerns.
  
• Their commission-based income drops in recent pay periods, disqualifying them from the loan amount.
  

Lenders re-verify employment and credit just days before closing. If anything changed since the initial approval, the loan can be denied—even after "clear to close" is issued.

What Are the Seller's Responsibilities During Due Diligence?

Mandatory Disclosures

Sellers must provide accurate, complete property condition disclosures. This includes known defects in the structure, mechanical systems, roof, foundation, plumbing, electrical, HVAC, and any environmental hazards like mold, lead paint, or radon. HOA documents—covenants, conditions, restrictions, budgets, and special assessments—must also be delivered promptly.

Incomplete or misleading disclosures can trigger buyer cancellation rights or post-closing lawsuits. Sellers should err on the side of over-disclosure.

Property Access

Sellers must allow the inspector, appraiser, and buyer reasonable access to the property. This typically requires 24-hour notice. Utilities—water, gas, electricity—must remain active so inspectors can test systems. Locked areas like attics, crawl spaces, and electrical panels must be accessible.

Response Timelines

When the buyer submits repair requests, the seller has a limited window to respond—often 2 to 5 days, depending on the contract. Delayed responses can trigger automatic contingency expirations in the buyer's favor. Sellers should prepare documentation for prior repairs: receipts, warranties, permits, and contractor contact information.

Maintaining Property Condition

Between acceptance and closing, sellers must maintain the property in its current condition. Removing fixtures, neglecting landscaping, or allowing systems to fail can trigger cancellation during the final walkthrough. The buyer expects to receive the home in the same condition as when the offer was accepted.

What Is the Buyer Doing During Due Diligence?

Securing Final Mortgage Approval

The buyer submits extensive financial documentation to the lender: tax returns, W-2s, recent pay stubs, bank statements showing reserves, and letters explaining any credit inquiries or gaps in employment. The lender verifies every claim, often contacting employers directly and requesting additional proof of income or assets.

Self-employed buyers face extra scrutiny. Lenders average two years of tax returns to calculate qualifying income, and any significant year-over-year decline can reduce the approved loan amount.

Home Inspection Process

The buyer hires a licensed inspector to evaluate the property's condition. The inspector tests systems, examines the roof and foundation, checks for water intrusion, and identifies safety hazards. The resulting report often includes dozens of items—some cosmetic, some urgent. Buyers typically request repairs for major defects or safety issues.

Appraisal Contingency

The lender orders an appraisal to confirm the property's market value justifies the loan amount. If the appraisal comes in below the contract price, the buyer has options: negotiate a lower price, increase their down payment to cover the gap, or cancel the contract under the appraisal contingency.

Title and Insurance Review

The title company searches public records for liens, judgments, easements, or ownership disputes. If the title isn't "clear," the seller must resolve issues before closing. The buyer purchases title insurance to protect against future claims.

Can a Buyer Back Out During Due Diligence?

Yes—if contingencies are in place.

Financing, inspection, and appraisal contingencies give buyers the legal right to cancel without penalty if conditions aren't met. If the loan is denied, the buyer can walk. If the inspection reveals major defects and the seller refuses repairs, the buyer can walk. If the appraisal is low and the gap can't be bridged, the buyer can walk.

What Happens to Earnest Money?

If the buyer cancels within the contingency period for a valid reason, the earnest money is refunded. If the buyer cancels after contingencies expire or for reasons not covered by the contract, the seller typically keeps the earnest money as compensation.

The problem? Earnest money—often a small percentage of the purchase price—doesn't cover the seller's true costs. Lost time, missed backup offers, carrying costs, and restarting the marketing process far exceed earnest money deposits.

How Structured Processes Reduce Transaction Fallout

Assumption is the enemy of closing. Every buyer claim—pre-approval, funds availability, employment stability—must be independently verified before the seller commits resources.

Pre-Listing Buyer Financial Verification

The Brenkus Team requests full loan approval documentation—not just pre-qualification letters. We contact the buyer's lender directly to confirm loan status, underwriting timeline, and any outstanding conditions. We verify that the buyer has liquid funds for the down payment and closing costs, not just assets they claim to have.

Upfront Property Preparation

Pre-listing inspections allow sellers to identify and address major defects before going to market. Fixing safety hazards—faulty wiring, structural issues, water damage—before listing reduces the risk of buyer cancellations during due diligence. Gathering permits, warranties, and repair receipts in advance speeds disclosure delivery and demonstrates property care.

Communication Protocols

Clear timelines and response windows keep the transaction moving. We establish 24-hour response protocols for all parties and require lender updates every 7 days during underwriting. A midpoint check-in around Day 15 confirms the loan is progressing on schedule.

Contingency Management

Shorter contingency periods reduce the window for surprises. Negotiating 10-day inspection periods instead of 21 days forces issues to surface earlier. Requiring proof that the appraisal was ordered within 48 hours of acceptance keeps the timeline tight.

A Seller Safeguard: How our team stops deals from falling apart 

In some transactions, after key verification milestones have been met, the seller may issue our custom counteroffer asking the buyer to remove all remaining contingencies before the scheduled closing date—typically 2 to 3 weeks out.

This approach is not automatic. It's not required. And it's not appropriate for every deal.

It's used selectively when the inspection has been completed, the appraisal has been ordered or delivered, and underwriting progress has been confirmed. At that point, if the buyer is truly committed and financing is on track, removing contingencies early can provide the seller with greater certainty.

This request is often paired with a meaningful earnest money deposit—frequently in the range of $5,000 to $10,000, depending on the property's price point and local market conditions. The exact amount varies and must be agreed to by both parties in writing.

In simple terms, this means the buyer is saying, "I'm all in." If the buyer chooses not to move forward after removing contingencies, the seller may keep the earnest money, subject to the contract terms and applicable state law. The specific consequences depend on the written agreement and local regulations—this is not a guarantee or automatic outcome.

This is a risk-filtering tool, not a punishment. It separates buyers who are genuinely ready to close from those who are still uncertain. All terms must be clearly documented, transparent, and agreed to by both parties. Sellers should consult with their real estate professional and, when appropriate, legal counsel before using this approach.

Backup Offer Strategy

Keeping a backup offer in place—or maintaining communication with runner-up buyers—provides a safety net. If the primary buyer cancels, a ready backup can activate immediately, minimizing lost time.

Seller Preparedness Checklist

• All disclosures completed and reviewed
  
  
• Buyer's lender contacted directly for approval status
  
  
• Proof of buyer's down payment funds verified
  
  
• Pre-listing inspection completed
  
  
• Repair permits and receipts gathered
  
  
• Utilities scheduled to remain active through closing
  
  
• Response protocol established with 24-hour check-ins
  
  

What Happens When Due Diligence Goes Right

When verification is thorough and timelines are managed, due diligence becomes predictable.

The inspection is completed on schedule with minor repair requests. The appraisal meets or exceeds the contract price. Lender updates show consistent forward momentum. Clear to close is issued five or more days before the closing date, giving everyone breathing room.

Sellers experience reduced stress. No surprise cancellations. No frantic scrambles. The timeline stays predictable, allowing coordinated moves and confident planning. The earnest money converts to purchase price at closing, and the transaction concludes as expected.

Final Thoughts: Due Diligence Is a Filter, Not a Formality

Due diligence exists to answer one question: Can this buyer actually complete the purchase?

For sellers, treating this phase as a verification process—not a passive waiting period—significantly reduces the risk of late-stage failure. Every "yes" from a buyer must be independently confirmed. Pre-approval must be verified with the lender. Employment stability must be checked. Funds must be documented.

No system eliminates all transaction risk. Market conditions, buyer behavior, and lender policies remain outside the seller's control. But verification discipline, timeline management, and backup planning are controllable—and they make a measurable difference.

Important: This article provides general education only—not legal, tax, or financial advice. Real estate laws vary by state. Sellers should work with licensed real estate professionals and consult attorneys when needed.

Curious how due diligence works in your situation? Let's see if your situation could use our counter offer or expert guidance. 
 

About the Author

Gavin Brenkus | Lead Agent & Director of Lead Generation


A three-time recipient of the prestigious "Who's Who Under 40" award from Las Vegas REALTORS®, Gavin Brenkus has firmly established himself as one of the most accomplished real estate professionals in Southern Nevada. As a Lead Agent and the Director of Lead Generation for The Brenkus Team, he is an integral part of a family-owned legacy that has achieved nearly $2 billion in sales volume and successfully closed over 8,000 transactions.


For Gavin, real estate is more than a profession—it's a lifelong passion. Immersed in the industry from the age of 16 and licensed before graduating high school, he offers a rare depth of market knowledge that combines youthful energy with decades of absorbed expertise.


His professional philosophy is built on a foundation of listening. Gavin is dedicated to fully understanding the unique wants and concerns of his clients, allowing him to curate a tailored and seamless experience from start to finish. This client-first approach ensures that everyone he works with feels heard, valued, and expertly guided.