When people buy with their egos, have no business overbidding, get all eBay and then remorseful, if the home even appraises.

Also, if anything is wrong with that house that they now perceive they overpaid for . . . they will want it fixed or become a flight risk. And the seller's also coming from ego thinking fine, let them go, someone else will pay it. And they usually won't because . . . hey, the house fell out. Now, what can we get it for? 
:: disclaimer - I am jaded ::

Buyer's Remorse from the heated battle of multiple offers...very common last 3 years.

Problems disclosed upon inspection and appraisals are the common reasons.

I have seen this as well and so have my clients.  I will answer as I have told them. . . "stuff happens".  People change their minds.  People decide they do not want to be in a multiple offer situation after the fact. People talk. To neighbors.  To their relatives. And co-workers. Everybody else--it seems. People lose jobs. Or get transferred. People become pregnant.  People pass away- - usually not at the same time.  Yes...stuff happens...sometimes we know why and sometimes we don't. 

This will be a good blog topic for you.

I believe we discussed this last year & I guess it is happening again. We came up with a 30 to 35% fall out rate of contracts. Buyers & sellers just don't have the same mindset.

They don't keep stats on this stuff even though they should.

I think there are several reasons. As you said many go under contract because buyers are in a hurry and don't want to miss out. Sometimes they go under contract "sight unseen". Then when they get to examine the house they change their minds.

In other cases, there are inspection issues that scare the buyer off.

And often in a multiple offer situation, the buyers bid too high trying to get the contract only to find the property will not appraise for the offer price.

Sometimes the seller is better off accepting a lower offer if the buyer is better qualified and more serious.

We just had an offer accepted on a home and the Listing Agent confided in me afterward that they had a higher offer, but chose ours because they knew that the other offer had too many variables.

The nature of a multiple offer means that buyers have to make a quick decision and many times they come to regret it.  I can recall a time that a lot of the due diligence was done before an offer was made. Can't do that now.

Praful,

You have excellent comments here, and I especially like Michael Jacobs.   

This is exactly why I tell my seller clients NOT to ask for highest and best, Praful. Work with the best Offer and have one of the others as a back-up. 

Buyers who 'win' are playing JUST to 'win'...and then, they sleep on it and wake up realizing they are paying FAR too much. 

  What did they use for the "out"?  The inspection contingency?

not typical.... it's often because of a surprise after a home inspection.... 

Greed...

Low appraisals would be my guess.  And the sellers do not want to reduce the price to meet the appraisal. 

I think it's buyer's remorse... they made a decision to quickly and now are having second thoughts after the thrill of the hunt is gone.

I suppose there are all sorts of reasons indlucing buyer's remorse and feeling they overpaid. I don't know the percentage of homes in our area that come back but it does not seem significant.

No.

Wayne Martin nailed this one!

I guess it wasn't the best offer after all!

Praful Thakkar 

Maybe they didn't pick the BEST offer from the RIGHT buyer.

Maybe the accepted offer was not negotiated with the seller's interest being most important. 

As a listing agent, the buyer really wanted the house. The home was sold as is with inspections, waiving the appraisal contingency and a substantial EMD.  When there is that much activity, the seller has a right to negotiate for the deal that is going to make it too closing.

not seeing things come back on the market here.

Once gone few come back.

HI Praful Thakkar. We don't often "suffer" from multiple bids in my area, but as most others have said, inspection issues, 'cold feet', and low appraisals are most common reasons for homes returning to Active status. Then there are a few mortgage denials due to facts getting in the way after the pre-approvals, too.
Bruce

First, inspection issues. Second, appraisal issues. 

Cold feet. Just like some engagements one party or both get the jitters and bolt Praful Thakkar .

I have not seen this alot, however, if it happens the main reasons would be:

Buyer's Remorse

A Home Inspection that disclosed damages the buyer was not willing to do

Appraisal issues

And like Michael Jacobs said, Stuff Happens

Not in my world.

Test and Inspections ?

We still see 25% of listings come back on the market, and some are from buyers writing on more than one home, and winning the bid.  They have to get out of one (or more).

That is the downfall of taking the highest offer.  The home may  not appraise out and then the buyers can't get the loan!...Just one example

Multiple offers are risky for the sellers as they may pick the wrong one, get mislead and then have to start all over again.

Could be lender issues, inspection issues, buyer didn't bring in the EMD.  I've seen it before.  House sells again pretty quickly and often for more money.  Doesn't bother me.  :)

I do not see this very often in my market.