Facebook
X
Pinterest
Copy Link
You’re a seller and your house went on the market last week. You received 15 showings in 9 days and a strong offer. By Day 10 on the market you were under contract and starting the transaction milestones with the buyer. Life is good and it’s smooth sailing from here, right? Only for 65% of you.
In our current market, 35% percent of first-buyer contracts are falling through, often within a few short days of going under contract. That means if you are selling your home you have only a 65% chance of getting to the closing table with your first buyer under contract. According to any high school grading scale, that’s an F, and it’s not an encouraging number.
That statistic is higher than normal but in our ever-changing market, it makes sense. Most of these homes fall out of contract for one of two reasons – inspection and/or buyer financing.
Inspection
Many sellers in the current market are surprised by inspection notices that they were almost certainly not expecting to receive. Some of these sellers purchased their homes in a market where inspection negotiations did not happen; inventory was so tight, bidding wars were so fierce, and while buyers inspected these homes, they did not ask for repairs or concessions because they would lose out to other buyers willing to waive them. These houses certainly needed maintenance and repairs, but buyers were willing to take on these projects, yet for whatever reason they were not completed. Now, these buyers are sellers, but the market is different; inventory is more plentiful, bidding wars are less fierce, and buyers have more leverage to negotiate when homes are in disrepair, and as a result they are asking these sellers for inspection repairs and/or concessions.
Buyer Financing
The second reason for the unusually high fall-out rate relates to buyer financing. Home prices and interest rates are both higher than many buyers would prefer to see, and at the same time, insurance costs and HOA dues have increased dramatically as well in recent months. All of these costs are pieces in the financial puzzle when buyers contemplate buying; due to the exorbitant increase in these costs many buyers have razor thin margins when it comes to affordability in this market.
It’s not unusual for a buyer to have second thoughts about a purchase when they take a hard look at the numbers and discover the monthly costs are higher than they expected or when their renegotiation attempts at inspection prove unsuccessful, and they then use their contractually stipulated, sole-subjective-discretionary outs to terminate their purchase contracts.
As a seller, when you’re ready to sell, your goal is to get to the closing table so that you can move on to what comes next. You want to be amongst the 65% whose trip to closing is with their first buyer; therefore, when presented with offers, your job is to choose the offer that’s most likely to close. Don’t get caught up in the price alone but instead evaluate all contract terms and be prepared to work with the buyer on major inspection items. In this market, your strongest offer might not be the one with the highest price, but rather the one with the most stable, motivated and realistic buyer.
