They are gnawing questions that many homebuyers inevitably ponder: What are my chances of getting the house I’ve fallen in love with at a price I can afford, which happens to be well below what the seller is asking? What are the odds that pesky contract contingencies, such as mortgage financing or the appraisal, could jeopardize my good deal?
Sellers have different concerns: What are the chances that I could actually get a higher price than what my cautious realty agent has persuaded me to offer? Might I have to throw in costly incentives to attract a buyer or — horrors — slash my price?
A new survey of 4,283 members of the National Association of Realtors offers some valuable insights, no matter what side of the deal you’re on.
Take pricing. Except in a handful of superheated markets where few houses are available for sale, the odds are strong that you as a buyer will be able to get the house you want for less than the list price. Just 34 percent of agents in the survey reported sales above or at the original asking price. So you’re probably more likely to write a successful below-list contract than you assume.
What about sales incentives — the sort of financial goodies that sellers throw into the pot to sweeten the deal? Are they commonplace? You might think so, but statistically they are not. Barely 20 percent of sellers offered any sweeteners whatsoever, according to the survey. Typically they involved the seller paying for some of the buyer’s closing costs or fronting the premiums for home warranty insurance coverage. Another concession: Sellers agreed to set aside money to remodel the kitchen or a bathroom to the buyer’s specifications. But overall, 80 percent of sellers opt to avoid concessions. If there needs to be a cost adjustment, presumably they prefer simply to subtract it from the price they’re asking.
Sales contract contingencies are another key factor in your transaction. But here’s a surprise: Though they are boiler-plate standard in many local realty contracts, large numbers of final contracts end up with none.
No language requiring the buyer to obtain a mortgage commitment within a specified time, no requirement regarding appraisal, not a word about an inspection.
Twenty-one percent of contracts covered in the survey were contingency-free. That’s an eye-opener because contingency clauses can be crucially important for buyers and sellers. Say you sign a contract on a home that looks great but has defects you missed — the roof is 10 years beyond its economic life, the plumbing is a disaster waiting to happen. Without an inspection clause, you may have no escape hatch out of the deal and no way to argue for a lower price.
Questions raised
Why do buyers agree to contracts like this? The survey provides no details, but there are several possibilities: Multiple bids on the house can push buyers to offer “clean” contracts; all-cash or distress sales may require the buyer to take the house “as is”; and some sellers may simply voluntarily waive certain contingencies.
But most buyers and sellers are smart: 75 percent of all final contracts include at least one contingency clause; 55 percent require a home inspection (still surprisingly low); and 43 percent have mortgage contingencies.
How about your prospects of going to settlement on time — or worse yet, having your sale blow up before or at closing? A few years ago, delays and cancellations were shockingly common, but in the latest survey things look much better. Seventy-one percent of sales settled on schedule in December, while 25 percent encountered delays but eventually went to closing.
What caused the delays? Buyers’ inability to obtain the mortgage they wanted topped the list, accounting for 31 percent of all delays. Examples might include glitches that turn up in the buyers’ credit files or the discovery of previously undetected liens or judgments that must be resolved before the lender could commit to the mortgage. Appraisal issues triggered 16 percent of all delays, home inspection disputes another 12 percent.
But here’s a really encouraging statistic: Total blowups are way down from where they were a couple of years back. During early 2015, between 9 and 10 percent of all real estate contracts were canceled before final settlement. Today that’s down to just 4 percent.
In the often contentious and complicated world of real estate, that passes for great news. Buyers and sellers are working out their problems … rather than walking away.
