A high number of home buyers are still walking away from their contracts, even as the housing market picks up and sales are on a rise, new data from Capital Economics shows. Nearly 18 percent of signed contracts on existing home sales were canceled from May through July.
What’s more, 36 percent of real estate professionals say they’ve experienced a problem with a contract, whether that be a delay, negotiations on the sales term, or a cancellation of the contract, according to the National Association of REALTORS®.
What’s leading to the high number of cancellations?
For one, some are blaming tight lending requirements for causing more contract cancellations. More buyers find that as they inch toward closing that they’re unable to get the financing approved for their home purchase or are facing major delays from obtaining a mortgage.
Some analysts blame the high number of contract cancellations on the limited inventory of homes for-sale on the market. The limited inventory is prompting some buyers to aggressively bid on a property in order to get a seller’s attention. However, after getting the “winning” offer, these buyers reevaluate how much they truly wanted the home in the first place, Bryan Sweeley with ZipRealty in Santa Clara, Calif., told MarketWatch. In those cases, if a home inspection or appraisal reveal any any potential snafu, the buyer may be prompted to walk away from the deal.
Still, Capital Economics notes: Just because a buyer cancels a contract to buy a house doesn’t mean they’re walking away from the housing market altogether. They may then go on to make an offer on another home, or it may be just renegotiating in a new contract on the same property.
Source: “Canceled Contracts Dog Real Estate Recovery,” MarketWatch (Sept. 19, 2012)
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