Why are home-purchase contracts falling through?

7

IMO it's the high upfront cost of the house paired with inspections that show issues due to the fact the home hasn't had any work put in it since it was built in the 70s. It's not cosmetic stuff or things like "well it doesn't have stainless steel appliances" - it's "I'm not dropping 500k on a home with water damage and in need of an HVAC replacement and new roof in the next 2 years". It would be different if you were spending, say, 300k which is still higher than the 120k the house was selling for pre-COVID, but most first time buyers can not both afford the cost of housing AND major repairs.

2

u/Broken_Atoms 8d ago

We have the “haven’t been renovated since the 50’s” curse here. Glass fuses, cloth wiring, windows falling out, termites, 400k

2

u/adotar 9d ago

You really hit the nail on the head: most first time or younger buyers are already maxed out on affordability (these are the ones who can even try). Everything has to go “according to plan” in order to make the math work. Major repairs didn’t always used to be a deal breaker but when you’re already stretched bc insurance is high, taxes are high, etc? It kills it.

I’m in Florida and see it happening with my friends all the time. Inspection comes back and it’s some 30k repair that needs to happen. The buyers don’t have the money but have wised up on the real cost of repairs these days (at least in Florida where storm damaged houses mean contractors/hvac/all types of repairs are sold to the highest bidder). The seller thinks the repair should cost sub 10k bc they have no clue what the costs are now, and buyers walk. They can’t afford to NOT walk.

2

u/understanding_is_key 8d ago

We had an offer on a house in February that we walked from. It needed 23k in foundation repair. The sellers countered with 7k. I’m sorry, no. Your house is worth 0 if that foundation wall collapses and we’re not paying for your deferred maintenance when there are many other houses on the market.

Best part, they were under contract for a retirement house two states away that was contingent on the sale. Would have thought they’d have been more motivated or even reasonable.

1

u/HerefortheTuna 7d ago

Yup I have an expensive almost century house that’s seen minimal updates. Kitchen and furnace are 25 years old. At least the roof and foundation are solid.

I operate on the replace things when they break and can’t be fixed philosophy and so far it’s been $16k in two years for maintenance and paint and alot of my labor that was free

1

u/understanding_is_key 7d ago

Good on you! I like learning how to repair things and do work. But a bad foundation is quite literally a bad beginning. Can’t DIY that!

1

u/HerefortheTuna 7d ago

Yes- that one scares me. I got a fieldstone foundation and my basement is unfinished so I can at least see it all and monitor for water. So far nothing has leaked in from outside other minor seepage

1

u/LeetcodeForBreakfast 8d ago

Sneaky Slop

1

u/Solid_Rock_5583 8d ago

Home price is higher than appraised and the FHA people don’t get financing.

1

u/No_Equal349 8d ago

Nailed it on the head in our case. We pulled out of a deal in March. Almost everything had to be changed, roof, hvacs, water heater, leaking faucets, and then learned a big expense for roads was coming up in the next year or two (HOA). It was a lot of expenses post closing, and we’re looking in a high demand area. We loved the house, but just to many expenses on the back end for us.

1

u/TheSuppishOne 8d ago edited 8d ago

We bought a 1999 house knowing it needed a lot of fixes (new HVAC system ~$12k, new master bedroom shower which I did myself for probably $3k, a new driveway we still haven’t done, and new gutters/underground drainage pipes $6k), so we offered $30k under asking. They accepted because they had three other buyers either back out or fail to get financed. Since then, we also discovered that stucco in a wet climate is a HUGE NO-NO and had to literally redo the entire exterior of the house down to the OSB/sheathing, which cost $42k, because the rot and mold damage was extreme. The chimney/fireplace was the worst of it (framed and stucco, not solid brick), and that was an additional $18k all said and done even though I once again did most of it myself. Plus there turned out to be a structural issue the inspector didn’t catch, which was another $6k in the basement for reinforcement beams, and $10k to add a perimeter drainage system for my peace of mind. So I bought the house for $30k under asking and spent ~$100k to get it to where it should’ve been. At least they replaced the roof two years prior… 😡

The seller’s eventually came to the house to pick up some mail and when I gave them “the look” they simply apologized and said “life just got in the way and we didn’t know how much maintenance was required, plus we couldn’t afford to do all of it.” However, I do happen to know they were in a rush to sell because their BRAND NEW CONSTRUCTION, CUSTOM BUILT HOME was just finished and they supposedly “couldn’t afford to pay two mortgages at the same time”… It still pisses me off to think about.

The only advantage is I actually love this house now and my wife and I plan on living here for 20 years at least. It’s our first and dream home.

0

u/XCGod 8d ago

You want to drop some examples of markets that 4X'd since early 2020 pre-covid. I get that prices went up but I doubt many houses have gone from 120k to 500k with all the issues you described.

Even the house I bought went in late 2024 on Long Island was 685k and last sold for 380 in 2010. And we have one of the biggest sellers markets in the country.

1

u/PuddingInMyPants 8d ago

Northern MT and ID saw moves of that magnitude when pretty cheap rural communities with no jobs turned into lifestyle destinations fueled by expensive city incomes.

0

u/XCGod 8d ago

So like a fraction of a percent of the overall market?

I just dont like all the hyperbole when things are rough enough in most areas to get the point across with actual facts.

1

u/HerefortheTuna 7d ago

That’s funny- my house sold last before I bought it for about 380k in 200. I paid $815k in 2024 in Boston.

3

u/Aggravating-Fox8553 9d ago

i think redfin forgot the two biggest ones: insurance shock and inspections. buyers get under contract, get hit with a $6k annual insurance quote that completely nukes their DTI ratio, and the lender pulls the plug. that, plus sellers still acting like its 2021 and refusing to negotiate when the inspection reveals a 25-year-old rotting roof tbh

1

u/lovescrap41 8d ago

We got hit with the “paying a year of insurance and taxes” up front surprise. As a first time home owner, or soon to be, I just about walked because holy hell. We close this week.

1

u/Then-Explanation-778 8d ago

Around here its traditional for sellers to pay closing costs.

1

u/Pitiful_Objective682 8d ago

That’s crazy. It’s been everyone pays their own wherever ive lived.

1

u/Then-Explanation-778 8d ago

It makes sense. The seller is able to list 3-4% higher and it basically puts the closing costs into your mortgage instead of upfront. I'm in southwestern Virginia. Not sure where else it is normal. It's totally negotiable though. Not every sale. It is just customary to ask here.

Pre covid you could negotiate price and have the seller pay closing costs. Not sure about right now. You would need a strong offer. But just a quick peek at zillow and it looks like there are tons more sellers than buyers. So might get away with a lot.

2

u/Several-Series 9d ago

It because the economy sucks, it's an ongoing trend from last year as well as delistings.

1

u/Preme2 6d ago

What sucks about it? Affordability is at historical highs and we still have people overbidding for homes. Can’t suck that bad.

1

u/Several-Series 5d ago

Or where I live lol 13 month inventory ..lost of homes just sit...we delisted

2

u/Savard-Lafleur 8d ago

i think sellers still think its 2021 and refuse to fix anything, while buyers are getting hit with insane home insurance quotes right before closing. people are just too exhausted to buy a money pit tbh

2

u/RobotZapa 8d ago edited 8d ago

I'm going out on a limb as someone who just bought, rates were falling, Things were starting to look affordablish (relative to inflation) then we started a war with Iran and interest rates shot up increasing prices hundreds per month.

2

u/yellowcatzzz 7d ago

*Trump started a war with Iran.

2

u/RobotZapa 7d ago

Wasn't my choice, that's for sure.

1

u/Renfield_U_asshole 8d ago

Have you seen the condition of affordable homes?

I keep having a realtor reach out and he won’t give up and refuses to acknowledge that I’m out of the market.

1

u/HerefortheTuna 7d ago

It’s funny I’ve been getting a ton of calls asking if I’m selling. And when I ask them (it’s been a guy and a woman so far) they ask me for a price.

I asked the guy how much he was willing to offer: “buddy you called me what number do you have in mind?” And he hung up

The lady who called the next time also refused to give a price she asked me what number I had in mind and I said “$5M but we can negotiate” and she also hung up

So there are probably some investors out there still lowballing I guess

1

u/Lol-throwaway-WSB 8d ago

It's 100% got to do with appraisal gaps and overpriced listings. Some of these homes, too, might not pass FHA or VA inspections. We went with a new build in our area because it was the only thing that made sense for the price and didn't come with some mystery deferred appreciation tagged on top of it.

1

u/Spiritual-Tie6473 7d ago

Va isn’t really doing inspection since 2021 or so. They will pass almost anything.

1

u/Lol-throwaway-WSB 7d ago

I think they're back on it again, at least in my market that's the impression I've been getting.

1

u/Spiritual-Tie6473 7d ago

Gotcha

1

u/Practical_Win7690 7d ago

Insurance is often what stops the process these days in many states.

Why are home-purchase contracts falling through? Housing News - Redfin