Buyers getting cold feet is nothing new, but as of late the number of buyers who are backing out of their home purchase agreements have hit a recent high of 15.7% of all homes that went under contract during the month of August according to a new report from Redfin. Putting that number another way, 60,000 deals fell through in August representing a 14.3% increase year-over-year and the highest percentage since October 2022 when mortgage rates surpassed 7% for the first time in decades. I've certainly experienced this on at least two of my listings this year, an unexpected and unexplained termination showing up in my email inbox without even a call from the buyer's agent. An agent coming in hot and heavy with promises of an offer and then going silent, or a buyer not responding when the seller counters their offer. As a listing agent one of the most crucial things I do before we go under contract is vet the buyer. I ask tough questions and have been known to ruffle some feathers in the process, which I have no problem doing since I am so protective of my clients. Here are some factors to consider before signing on the dotted line with a prosepctive buyer. - The “Cash Offer”
An all-cash offer usually tends to be lower than other offers, but sometimes can be the safest option. Not having to deal with the hoops that a lender brings to the deal is amazing and removes a lot of uncertainty. However… we need to obtain proof of funds and clairify if they may actually be doing a hard money loan (which is written as a cash offer). - Buyer Pre-Approval
If the potential buyer isn't paying cash, you'll want to see a pre-approval letter from the buyer's lender. Accepting an offer from a pre-approved buyer is much safer than taking your chances on one without it. You must also understand that pre-qualification is not the same as pre-approval. A buyer who has only been pre-qualified still may not receive loan approval once they go through the full underwriting process. Also its imperative to make sure the lender is reachable and is experiened in doing deals in Texas. - Contingencies
When you receive an offer, there's a good chance there will be a list of things that need to happen before the final deal can go through. These are known as contingencies and often include things like inspections, appraisals, and financing approval. As a seller, you'll want to consider the offer with the fewest contingencies and the shortest amount of time you'll have to wait until you're fully under contract. We also want to see a short option period (also synonymous with ‘inspection period’) - Loan Type
The type of loan your potential buyer is using also makes a difference. Conventional mortgages are fairly simple to obtain. However, if the buyer is using an FHA, VA, or other government-back loans, there is a greater chance for delays and hurdles. With these types of loans, it's common for the lender to require additional approvals and repairs before final loan approval. - Seller Expenses
Carefully review each offer for seller costs, which will lower your final profit. This includes items like seller-paid closing costs and requested repairs. If a buyer is requesting that you include appliances like the washer and dryer, factor in the value of these items when determining the total value of the offer. - Closing Timeline
How soon the buyer wants to close can also have a big impact on deciding which offer is right for you. If you're building a new home or need to delay moving for some other reason, then an extended closing timeline may save you the hassle and expense of having to move twice. If you've already purchased a new home and are paying two mortgages, then you might want to choose the offer that will close the soonest. - Earnest Money
When submitting a purchase offer, buyers must make an initial deposit, called earnest money. (paid to the title company) This typically is about one percent of the purchase price. If the buyer gets cold feet after the all their contingencies have passed, the seller is usually alwarded the earnest money. When comparing two similar offers, the one with more earnest money does offer you slightly more security.
|
|
There are a few other things to consider, but these are the main pillars. Theres a portion of sellers that believe buyers should be putting down 20%, which is certianly best practice, but a lot of my buyers are putting down anywhere from 3-25%. I think it's important to note that seeing 3% down on a contract does not necessarily mean the buyers are ‘cash poor’. While it could mean just that, it also may just mean the buyers are choosing to retain as much cash as possible for improvements or expenses. If the buyer is not paying all cash, it's important to ask the lender if the buyer is aware of the realistic ‘actual’ monthly payment including PITI (principle, interest, taxes, and insurance) to reduce chances of the “sticker shock” termination. Lastly, you can do all the vetting and do everything right as a seller… and the buyer could still just terminate. Sometimes people change their mind, sometimes they get spooked by what their family thinks of the property, people lose their jobs, get sick, have emergencies, or unforseen monumental life changes. When this happens, you do have some recourse as a seller but if you're on a timeline it may be best practice to cut your losses and move on. |
|
September 1st - 31st by the Numbers |
|
Everyone's favorite! The data is in and numbers have been officially crunched for September. Below is data broken out by zip code for recent price reductions, pendings, solds, pending back to actives (terminated contracts), and total number of showings for this month. Want to see more specific numbers for your zipcode, or to talk more about your specific market and circumstances? Call me or reply to this email. 832-465-6458. |
|
mariam@marvelousinhouston.com | 832-465-6458 |
|
A real estate brokerage since 1911. |
|
Marvelous in Houston, Brokered by Douglas Elliman Real Estate |
|
|
