What do I need to know before backing out of a Boston condo for sale contract?
Are Boston condo buyers backing out of purchase contracts?
Yes, and because of higher interest rates and a softening housing market, home buyers are continuing to back out of purchase contracts at an elevated rate.
Nationally how many buyers backed out of real estate contracts?
About 64,000 home-purchase agreements were canceled in August, according to a new report from Redfin. That’s equal to 15.2% of home contracts initiated during the month and similar to the 15.5% canceled in July. A year ago, the share was 12.1%.
If you’re considering joining the ranks of those who walk away from a deal in progress, it’s important to know whether it will cost you to do so. Or, if you haven’t yet signed a contract but are nearing that point, it’s worth determining if you can cancel at some point in a way that doesn’t result in forfeited money.
If I back out of a Boston condo for sale contract is my deposit at risk?
Typically, Boston condo buyers provide what’s called an earnest money or “good faith” deposit when an offer is made on a home, although the specifics vary. Depending on the price of the condo the initial deposit on an offer is $1,000 and up. The P&S is anywhere from 5-20%. The deposit is kept in an escrow account. Depending on where in the sale process your deposit could be in danger.
If the seller accepts your offer and you sign a purchase agreement — whether weeks or months before settlement — you can risk losing that deposit if you try to get out of the contract without meeting the terms.
Can Contingencies can help protect Boston condo buyers?
Yes. Given the financial risks of a broken contract, it makes sense to ensure the final purchase is contingent upon certain aspects of buying a Boston condo for sale. Common contingencies relate to home inspection, appraisal and financing.
What are some examples of a Boston condo contingencies?
For example, if the inspection were to reveal problems with the Beacon Hill condo that are unacceptable to you, a home inspection contingency generally would mean you can walk away and get your deposit back. A second example, if the appraisal were to fall short of the agreed-upon sale price or you cannot secure a mortgage at a rate or terms specified in the contract, you could back out without losing your money.
Are more Boston condo buyers requesting contract contingencies?
Yes, Boston condo buyers are putting contingencies back in [purchase agreements] … and not giving it all away to sellers like they did in the past when there were bidding wars for Boston condos for sale.
Are higher mortgage interest rates causing Boston condo buyers to walk away from a sale?
Yes, because there now can be affordability issues causing buyers to walk away, especially in new construction, as interest rates rise.
Basically, with persisting supply chain issues affecting construction, new houses are taking longer to complete. This means that the current interest rate available to a buyer ahead of settlement may be higher now than it was before construction started.
Is the Boston condo market still on fire?
After two years of surging home prices, rising interest rates have hit the brakes on a red-hot housing market. The average fixed rate on a 30-year mortgage was 6.7% as of Friday, up from about 3.3% in early January, according to Mortgage News Daily.
The difference a higher interest rate makes can be stark.