What’s Your Denver Area Home Worth? Are you thinking of selling your home or interested in learning about home prices in your neighborhood? I can help you. Discover Your Home's Value
It’s official: Termination rates are on the rise.
As you look in our market, you may have asked the common question, Why are Buyers Backing Out of their contracts? The reality is that the current market environment presents more challenges, and we’re witnessing a higher fallout rate of contracts. Approximately 35% of properties in our market that go under contract are being terminated and returned to the market as active listings. For perspective, the fallout rate from 2013 to 2019 was around 15%, and during the pandemic years of 2020 to mid-2022, it was just 9-10%. Buyers are more likely to terminate now than nearly any other time. As an experienced expert, I’ve dealt with uncertain buyers before. That’s why today, I’m sharing why buyers are leaving deals in this market and explaining what you can do to stop a termination before it happens.
1. The Market is Slower and Buyers Are Feeling Pressure to Make Quick Decisions. Due to market competition, economic news, the election, and a ton of other reasons, a lot of buyers want to finalize a deal as soon as possible. As a result, many of them jump into deals before they’re ready and in some cases, may change their mind. To prevent this, get your listing agent to vet potential buyers as well as their agents. If they’re pre-approved and have a strong motivation for moving, they’ll be much more likely to follow through on your home.
2. Inspection Issues. The most common reason why housing transactions fall apart is due to inspection issues. A buyer might absolutely fall in love with your home and have full intentions of following through, only to have problems come up in the inspection that gives them cold feet. To prevent inspection problems from ruining the perfect deal, I highly recommend a pre-listing inspection. This way, you can take care of potential problems upfront and even go into negotiations with more leverage.
3. Loan Availability Issues. We’re seeing many transactions fall apart due to loan availability issues just days before closing. As I’ve said time and time again, it is of utmost importance to have a skilled Listing Agent that will vet potential buyers before you accept an offer. In doing so, you will be able to uncover some of these potential risks, before deciding to go under contract.
4. Homeowner’s Insurance Premiums are Rising. Another point of concern in 2024 is the rise in homeowner’s insurance premiums due to Colorado’s classification as a high-hazard state, especially in the foothills communities. I encourage buyers to prioritize this deadline in the early stages of the contract to avoid surprises later down the line. Your listing agent will also be able to talk with the buyer’s lender ensuring the buyer is expecting a realistic homeowner’s insurance premium in their pre-estimations.
5. HOA Insurance Coverages. For attached properties, terminations are also happening at the Association documents deadline, as many condo complexes have had to increase their insurance coverage. The costs associated with these changes, often reflected in increased HOA dues or special assessments, have led to unexpected financial burdens for homeowners. For example, in one community, the HOA dues jumped from about $300 to $800 per month, and in another, a special assessment of over $3000 was levied annually for the next five years. This is not the case for every association but I highly recommend checking in with the HOA prior to listing or offering on a home in an attempt to verify as much information as you can so there are no BIG financial surprises for the buyer once you are under contract.
Understanding these factors can help you avoid or at least prepare for these common pitfalls and increase the likelihood of staying in contract. Call or email me for a free, no-obligation pre-sale consultation. I’ll go over your neighborhood, the market, staging, and more. I look forward to hearing from you very soon!
Want to work with me? Here are some ways to get involved.
-
The place where you can trust my experience and expertise to get the answers you need. Book a Free Phone Consultation
-
Looking for a Home in Denver? Search the entire MLS for your Denver home. Search the MLS
-
Subscribe now to get my latest insights and tips to sell or buy a house. Latest Housing Market Insights