Hot! Hot! Hot!
It’s getting hot out there, but the temperature isn’t the only thing that’s hot. The real estate market is pretty hot too, based on the March sales statistics that show a 17.3 percent appreciation rate in single family homes and a 21.2 appreciation rate for condos and townhomes compared to March of last year. However, sometimes in a hot market buyers get cold feet, and then you really have a hot mess.
People by nature are fickle, and real estate buyers are some of the most fickle in all of humanity. Just about anything can set buyers off from perceived problems like a death on the property to unusual paint colors creating negative reactions, but one of the things that really turns buyers feet to ice is if they think they are overpaying, particularly if they have just survived a bidding war.
In addition to Manatee County experiencing a hot market, according to the National Association of Realtors, the national median home prices during 2014 rose to their highest level since 2007. Therefore, it’s not surprising that more buyers are backing out of contracts to the tune of an 8 percent increase.
Buyers don’t just back out because of price, they can also back out for totally legitimate reasons related to structural issues uncovered during a home inspection. That being said, some buyers are just too picky, finding fault with minor issues common in most homes, and people being people, many have commitment issues.
Prior to a contract of sale being executed, buyers who change their minds don’t lose any down payment money. There are usually contingencies within a real estate contract that protect buyers in the event they don’t qualify for financing or the property inspection turns up major problems. If this happens, all bets are off and the property goes back on the market and the buyers get their money back.
After a contract of sale is fully executed signed by all buyers and sellers, backing out of a deal becomes a lot more contentious and expensive. Generally speaking buyers who change their minds at this point lose their deposit money, which is held in an escrow account by a title company or a realtor.
However, it’s not uncommon for buyers to get their down payment money back if they can prove a valid cause. Sometimes it’s just not worth it to the sellers to get into arbitration with an unhappy buyer over down payment money. Do you really want to force someone to go forward on a transaction for the purchase of your family home or have to face them in court?
Interestingly, higher end homes have a higher rate of buyers walking away from down payment money than lower end properties. Buyers with a lot of money may not feel the loss of funds as acutely as others and may calculate that it’s the price they have to pay to get out of something they’re not sure of.
And where does the poor real estate broker fit into all of this drama? Technically, agents who can prove they have done their job bringing about a meeting of the minds and agreed upon sale can demand their commission from the buyer’s down payment money. Again, they may not want to do this since it will certainly impact future business with this buyer and maybe others. So let’s have a little compassion for professional real estate sales people who put in a lot of time and legwork with the risk of nothing in return.
Hot mess, cold feet – just another aspect of an appreciating real estate market. We asked for it, it’s here and now we have to figure out how to handle it.
