Home Buyers are canceling more and more contracts, according to the National Association of REALTORS®. On average, 8-10% of contracts get canceled prior to closing. That equates to about 1 in 10. NAR surveyed its members for the following stats. May 2011 saw only a 4% cancellation, whereas June 2011 saw 16%. That's a little disturbing. Why are so many people canceling their contracts?
Lawrence Yun, NAR's chief economist stated that "the sudden swing is surprising and worrisome, but that there are no hard statistics available on the causes."
I don't think you need stats to say one of two things. Either agents are showing buyers houses prior to talking with a mortgage professional, or Lenders are making their hoops smaller and smaller making it harder for people to qualify, though they claim to be easing some standards.
There probably is a third option that buyers are so picky these days and are looking for a perfect house, and when their inspection report shows something other than perfect, they freak out and back out.
My money is mostly on agents showing buyers who are not qualified to buy. Just a couple of days ago, I received a call from a "buyer" wanting to look at houses but he wouldn't talk with a lender. He told me several times that he had bad credit so red flags are popping up. I suggested he talk with a lender first to see how bad his credit is so we could determine if it was a 2 month fix or a 12 month fix or more, but he didn't want to spend the time to get pre-approved to learn how to better his credit until he found a house worth spending that time and effort.
I told him he was putting the cart before the horse and you can't find a house, fall in love with it, only to find out you can't actually buy it. He kept telling me he understood, but that I didn't understand that he just wanted to look at houses. I'm sure there are many agents so hard-up for business that they would humor him and take him out, and then actually write an offer on a property if he fell in love... but if he can't actually buy that house, why are you humoring him?
Advice to agents: One of my "best practices" is to spend your time working with buyers who can buy. I'm not in this business to "show" houses, but I'm in this business to "sell" houses. I can't sell one if you can't buy it!
Advice to buyers: Get pre-approved, and know what your credit looks like! If you're too embarrassed to do that, think about how embarrassed you'll be if you have to cancel a contract with and tell sellers you aren't able to actually buy their house because you didn't worry about the loan part beforehand.
Here's more of the information from NAR.
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Copyright© 2011 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.
* NAR Reports 16% of Contracts Were Canceled in June - Why? * was first published on donnahomesblog.com.