2025 Real Estate Curse?!

More buyers, more problems. Every real estate market has its challenges, right? Well the latest spin on this gift of a real estate market that keeps giving…fall out. Almost 15% of home sales are cancelling mid-escrow right now which has implications for the broader market. Let’s get into it. 

Contract fall out is at a record high and that’s not good news. Not for buyers, not for sellers and not for realtors or lenders either. We’ve been talking about the increase in buyer power as the market has shifted away from a seller’s favor but which that comes the mentality of “Oh, I’ll just find a better house” rather than both parties being inclined to keep the deal together. I want to break for you why this is happening, how to avoid it and what buyers should consider before cancelling. 

The Market Shift x Economic Uncertainty 

A buyers’ market appears to be fueling pickiness. Inventory is at a five-year high which gives buyers more options and more leverage. I find that buyers know deep down that buying a home is the right financial move but there is a lot of internal and external noise making them second guess the decision. Let’s start with the internal noise. The mortgage payment is likely going to require a lifestyle change and the piece of them that doesn’t want to “adult” is whining. They are going to fork over their savings that helped them sleep at night. They probably are not buying their dream home so while they are excited, they are also very aware of the compromises they are making. 

So when inspections come back, it’s almost like they are looking for a reason to cancel. In fact, that’s exactly what they are doing. We are finding that even when the sellers agree to fix everything, buyers still walk. 

Then there’s the external noise. The news hinting at a market correction. The higher mortgage rate they are locking in, rising geo-political concerns and unstable financial markets. Many buyers are of the age where they can remember or were directly impacted by the last financial crisis and the uncertainty of the world right now is just too much. So they get cold feet after their offer is accepted and start looking for a way out. 

Not so far from me in Reno, the Las Vegas real estate market is making headlines. The cancellation rates there are even higher than the national average. In April, almost 19% of pending home contracts were canceled. That’s one in give deals collapsing, making Vegas one of the toughest markets in the country right now. Most are attributing the situation to oversupply. 

Interesting fact, here in Reno – almost half of the homes selling are closing below asking price.  

How to Avoid a Dead Deal 

Whether you’re a realtor or a seller, you’re not helpless to this fallout trend. Last week I talked about preparing a home for sale when buyers are fickle. I have a few more tips but first, there is something you have to keep in mind. In previous markets, when homes essentially sold themselves, buyers were racing to the finish line which is the closing table. Now that we know buyers are looking for a way out more so than a path to closing – sellers and their realtors need to plan ahead. 

A couple of conversations upfront go a long way. Realtors on both sides need to prepare their clients for inspections. In reality, every step of the process should be reviewed and planned for in advance. I do this with my clients so when they get their initial loan disclosures – it’s essentially just a review of old information. There’s no payment shock or cash to close scaries, I can literally say in response to every single question, “Remember? We talked about this?”  I’ve prepared them to feel apprehensive at this stage, so they know that speaks to their financial responsibility…rather than thinking it’s their gut telling them to “RUN!” 

When the inspection report comes back, if a realtor has done their job preparing the client – it’s really just another time to say, “Remember, we talked about this. How overwhelming this report can be and what kind of things we need to look for. Remember, we also talked about the options that would be available to you at this point.” 

Here’s a little extra advice too. Those contingent buyers – they’re the real deal. They aren’t looking for a way out of this deal because they not only know what it feels like to be a seller too…they also don’t want to be homeless.

Along those same lines. Maybe think twice about that cash buyer who hasn’t seen the property in person yet and whose assets have been through the ringer this year in the stock market. 

For my buyers… 

There are certainly reasons to cancel, and I love that you are protected by your contingency periods. You absolutely should do your due diligence on a property, and I never want you to close on a ticking time bomb. 

I also want you to be aware this purchase is an investment, so you have to analyze the numbers as well. It’s not just about the aesthetics of the home; it’s about your amortization and appreciation gains. The longer you wait to get in, the more you lose on those gains. Also the more you risk this buyers’ window closing because remember as soon as rates come down – your competition comes back.

It’s natural to feel like there is greener grass out there. That’s why homeowners move every 8 years on average. I always smile when a client tells me they found their “forever home” because I’m happy for them but also because forever is an elusive concept.