Monday, January 16, 2017
Anna Marie Erwert
On Jan 11, a new Trulia study examined the shadowy aspect of real estate sometimes called a “sale-fail,” when for-sale homes that fail to sell initially are placed placed back on the market later. Trulia’s main focus: those listings that return again to market after being listed as “pending” or “active contingent.” The study pulls national data from the 100 largest metro areas and shows this trend up everywhere, even right here at home.
Why sales fail
Generally, sales fail for these common reasons
- Buyer fails to obtain financing after entering contract
- Something comes up in the home inspection that causes buyer or seller to balk over who will pay for/how serious the a repair the issue in question (in SF, that could be foundation problems, roof leaks, termite infestations, or any number of issues)
- Sellers decides they can line up a better offer and tank the deal
- Bank appraisal comes in significantly below asking price; and either seller not willing to lower price or buyer not able to cover the gap out-of-pocket
- Seller simply decides not to sell, or buyer simply decides not to buy
Interesting national results
According to Trulia’s study, data show that deals to sell homes in the US are falling through at a faster rate than they were a year ago. Most at risk of all: agreements for starter homes. “The ‘sale fail’ phenomenon applies most commonly to starter homebuyers nationally, at a rate of 7.1percent of all listings in Q4 2016, up from 2.4 percent in Q4 2014,” says Trulia.
When asked what might be causing this particular trend, Felipe Chacón, Housing Data Analyst at Trulia, told On the Block that “fail rates have been increasing nationally, as first time home buyers are increasingly getting back into the market and inventories continue to be squeezed.”
Tight inventories create a more pressured buying atmosphere that can lead to missteps on either the seller or buyers’ part during the process. Additionally, first time home buyers face an added level of lending scrutiny and come to the table with smaller down payments and less equity.
Interesting local results
Specifically, in the San Francisco metro area, Trulia found that
- San Francisco has experienced an unusually high jump in sale fails, jumping from 3.8 percent of all listings to 5.0 percent within the past year.
- On a quarterly basis, the San Francisco market “a failed sale” rate in 5.3 percent of all unique listings in the most recent quarter of 2016.
The gallery above shows three local homes as examples of initial sale fails that came back on market to finally sell or are still now active (one, in fact, failed to sell three separate times over the course of three months). That such a phenomenon exists, and that it’s actually increasing in frequency, might surprise some readers who know SF’s real estate reputation.