If your buyer’s financing falls through in Sioux Falls, the sale isn’t automatically dead — and depending on your contract, you may get to keep the earnest money. Whether the deal can be saved, and whether you walk away with the deposit, comes down to the financing contingency and its deadline in your purchase agreement.
Quick Answer: When a Sioux Falls buyer’s loan is denied, the purchase agreement’s financing contingency decides what happens next. If the buyer backs out in good faith before the financing deadline, they usually get their earnest money back. If they miss that deadline or default, you may keep the deposit — and you can move to a backup offer, relist, or renegotiate the terms to save the sale.
Why a buyer’s loan can collapse this late
Loan denials aren’t rare. Roughly 15% of home-purchase applications were denied in 2024, and that share has climbed as rates rose, according to Federal Reserve research. With the 30-year fixed rate at 6.66% as of the week of August 27, 2026 per Freddie Mac, buyers are qualifying with thinner cushions, so a small change can tip them over the line.
Here’s what trips sellers up: a pre-approval is not a guarantee. Lenders re-pull credit and re-verify employment 24 to 72 hours before closing. A new car loan, a job change, a large unsourced deposit, or a low appraisal can all sink an approved loan in the final week.
The good news: this is still the exception. About 5% of contracts nationally were terminated in the three months ending December 2025, according to the National Association of Realtors Confidence Index, with financing among the leading causes. This is one of the first questions Sioux Falls sellers ask me the moment underwriting goes quiet — so let’s walk through exactly where you stand.
Do you keep the earnest money?
It comes down to the contingency and the calendar. In the Sioux Falls area, earnest money — usually about 1% of the price, or roughly $3,350 on a $335,000 home — is held in trust by the title company or the broker until closing.
South Dakota’s Real Estate Commission spells out the default rule. If the sale isn’t completed “through no fault of yours,” the buyer’s earnest money is refunded; if the buyer doesn’t follow through after acceptance, it “may be forfeited, in addition to other possible legal remedies,” per the state’s consumer guide.
The pivot point is the financing deadline:
- Before the deadline: a buyer who applied in good faith and got denied can typically cancel and recover the deposit.
- After the deadline: the money often goes “hard,” and a buyer who then fails to close risks losing it to you.
One catch worth knowing: under South Dakota rules, the broker or title company can’t release disputed funds without a written agreement signed by both parties or a court order. So even when you believe you’re owed the deposit, you may need the buyer to sign a release — or take a dispute of $12,000 or less to Small Claims Court. Because these calls turn on your specific contract language, it’s a spot where legal counsel is worth the call.
Your options when the loan dies
A denied loan is a fork in the road, not the end of it. Here’s the playbook, roughly in the order I’d work through it:
- Grant a short extension. Sometimes it’s one fixable underwriting condition — a letter, a re-sourced deposit, a corrected document. A few extra days can save the whole deal.
- Renegotiate the path to closing. The buyer may switch loan programs, bring more cash, or accept a small price or terms adjustment that gets them across the finish line.
- Pivot to a backup offer. If you took a backup, you can move to it fast rather than starting from scratch. This is one reason I encourage backups in a tight market.
- Relist. With Sioux Falls sitting at about a 3.3-month supply as of the July 2026 report — still a seller-leaning market — a fresh listing usually draws interest quickly, and buyers rarely hold the prior buyer’s financing against the house.
- Pursue the deposit. If the buyer defaulted after the financing deadline, seek the earnest money through a signed release or, if needed, Small Claims Court.
How to protect yourself before it ever happens
You can stack the odds in your favor at the offer stage, well before underwriting. When you’re comparing offers, don’t just read the price — weigh the strength of each buyer’s financing. A verified pre-approval from a local lender carries more weight than a quick online pre-qualification, and it’s fair to ask your agent to call the lender.
Beyond that: keep the financing contingency deadline tight and firm so the money goes hard sooner, take backup offers when you have the interest, and consider a kick-out clause if you accept a contingent offer so you can keep marketing the home. None of these guarantee a smooth closing, but together they shorten your exposure if a loan does fall apart.
Frequently Asked Questions
How often does a buyer’s loan fall through after pre-approval?
Most deals close, but it happens more than sellers expect. About 5% of contracts nationally were terminated in the three months ending December 2025 per NAR, and roughly 15% of purchase-loan applications were denied in 2024 as rates rose. A pre-approval isn’t a guarantee, because lenders re-check credit and employment right before closing.
Can a Sioux Falls seller keep the earnest money if the buyer’s financing falls through?
It depends on the financing contingency and its deadline. A good-faith denial before the deadline usually means the buyer gets the deposit back. If the buyer misses the deadline or simply walks, the money may be forfeited to you — but South Dakota requires a written release from both parties or a court order before the funds are actually disbursed.
How long does the financing contingency last in a Sioux Falls purchase agreement?
It’s a negotiated date written into the contract, often two to four weeks after acceptance and frequently the last contingency to clear. Once that deadline passes without the buyer canceling, the earnest money typically goes hard and becomes at risk if the buyer later fails to close.
Should I relist my Sioux Falls home right away if the loan falls through?
Usually yes. Sioux Falls inventory is still tight at about 3.3 months of supply as of the July 2026 report, and a financing collapse doesn’t carry the stigma of a failed inspection. If you kept a backup offer, you can often pivot to it within days instead of starting over.
Does a deal falling through hurt my home’s standing on the MLS?
Far less than sellers fear. The listing simply moves from pending back to active, and buyers rarely know the reason was the other buyer’s loan rather than a problem with the house. Pricing and presentation still matter far more to your next offer.
Where this leaves you
A buyer’s financing falling through feels like a gut punch, but in Sioux Falls it’s often a delay, not a dead end — and with the right contract terms, you may keep the deposit and still get to closing. The right move depends on your exact contingency dates, your backup options, and how your home is positioned in today’s market.
If you’re staring at a shaky loan approval, or you want your listing set up so a financing hiccup doesn’t cost you weeks, I’m happy to walk you through the numbers and your options. Reach out anytime at (605) 413-7903.
About Tyce Ortman
Tyce Ortman is a residential real estate agent with the Jeff Merrill Team at eXp Realty, serving Sioux Falls, South Dakota and surrounding communities including Brandon, Harrisburg, and Tea. He works with both buyers and sellers, guiding them from first search or listing all the way through closing. Reach Tyce at (605) 413-7903.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, week of August 27, 2026
- Federal Reserve Bank of St. Louis — mortgage denial rates (2024 data)
- National Association of Realtors, Realtors Confidence Index — December 2025 survey, contract terminations
- South Dakota Real Estate Commission — Buying and Selling a Home in South Dakota: A Consumer Guide
This article is general information for the Sioux Falls, South Dakota market and is not legal, tax, or financial advice. Every transaction is different — verify contract terms with your agent and, where warranted, an attorney. Tyce Ortman and the Jeff Merrill Team support equal housing opportunity under the Fair Housing Act.
Tyce Ortman | eXp Realty 
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