In August 2023, the US housing market experienced a significant challenge as the cancellation rate of home-purchase agreements reached its highest point in nearly a year. With nearly 60,000 cancellations, this accounted for 15.7% of homes that had gone under contract that month. The culprit? High mortgage rates, reaching an average of 7.07% on a 30-year fixed mortgage, with a peak of 7.23% – the highest in decades.
This surge in cancellations was driven by what’s often referred to as “sticker shock.” Homebuyers, eager to secure their dream homes, were confronted with the reality of significantly higher monthly payments due to soaring mortgage rates. In the face of additional expenses for maintenance, repairs, and closing costs, some buyers chose to back out, even if it meant forfeiting their earnest money.
The escalating rates led to a scenario where many sellers were willing to let buyers walk away rather than agreeing to repair requests, perpetuating the problem. In such a climate, the balance between buyer and seller interests was tested.
However, in every challenge, there lies an opportunity. One solution to help prevent the cancellation of home deals is for sellers to provide buyers with seller-provided reports and disclosures before entering escrow. This proactive approach can alleviate the “sticker shock” and build confidence among buyers.
By offering thorough disclosures, sellers can present a clear picture of the property’s condition, known issues, and any necessary repairs. These reports can help buyers make informed decisions before committing to the purchase. When buyers have a comprehensive understanding of what they are getting into, they are less likely to back out of the deal when faced with unexpected surprises.
For sellers, this approach can streamline the selling process, potentially attract more serious buyers, and minimize the chances of deals falling through. It fosters transparency, trust, and fairness on both sides of the transaction.
In a housing market challenged by high mortgage rates and rising prices, providing buyers with complete information can be a powerful tool to prevent cancellations, reduce uncertainty, and create a more secure and transparent real estate experience for all parties involved.
https://www.redfin.com/news/housing-market-tracker-august-2023/
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