An increase in backouts can reflect a changing market. For example, some buyers who started their search a few months ago may no longer qualify for a mortgage high enough to cover their purchase. Some frustrated buyers may have made a quick decision and then regretted it as more listings came into the market. And some buyers may feel they’ve gained more power after a seller refused to negotiate requested changes.
Florida is home to many cities seeing buyers back out, holding six of the top 10 spots in Redfin’s study. Jacksonville welcomed the No. 1 spot, with buyers backing out less than a third (29.3%) of all contracts.
Top U.S. cities where buyers backed out
- Jacksonville – 29.3% of homes under contract
- Las Vegas – 27.4%
- Lakeland – 26.2%
- New Orleans – 25.9%
- San Antonio – 25%
- Orlando – 24.5%
- Palm Bay – 24.5%
- Deltona – 24%
- Atlanta – 23.7%
“Homes are sitting on the market longer now, so buyers realize they have more options and room to negotiate. They’re asking for repairs, concessions, and contingencies, and if sellers say no, they’re backing out and moving on because they’re confident they can find something better,” says Heather Kruayai, a Redfin real estate agent in Jacksonville. “Buyers are also skittish because they’re afraid a potential recession could cause home prices to drop. They don’t want to end up in a situation where they purchase a home, and it’s worth $200,000 less in two years, so some are opting to wait in hopes of buying when prices are lower.”
Alexis Malin, another Redfin agent in Jacksonville, warns buyers that there’s no guarantee they’ll be able to find better deals in the future. Annual home-price growth has started to slow – to 8% today from 17% a year ago – but prices are still rising, and Redfin economists don’t expect them to crash.
“Some buyers who are backing out of deals have this mindset that the market is crashing and they’ll be able to get a home for $100,000 less in six months. But, unfortunately, that’s not necessarily the case,” she said. “Homes in many parts of Florida are still selling for a pretty penny, so I warn my buyers that the grass might not be greener on the other side.”
Some buyers may also be backing out due to 5%-plus mortgage rates. Those who started their search months ago, when rates were closer to 3%, maybe realize the type of home they wanted before is now out of the budget since monthly mortgage payments have soared nearly 40% yearly.
“Home-purchase cancellations may taper off as sellers get used to a slower-paced market,” says Redfin Deputy Chief Economist Taylor Marr. “Sellers have already begun to lower their prices after putting their homes on the market. As a result, they’ll likely start pricing their properties lower and become increasingly open to negotiations.”
“The last four buyers I’ve worked with have all backed out of deals,” Malin said. “One of my clients asked the seller for money to cover painting the home. The seller said no at first, so my buyer canceled the contract, but the seller changed their mind and repainted the whole house. However, my buyer still walked away because he decided he didn’t love the home that much and knew he had other options.”
Article by Kerry Smith, © 2022 Florida Realtors®