Fewer Buyers Waive Contingencies
Rising home prices create greater risk for buyers. As a result, they’re less likely to forego inspections, appraisals and other contract contingencies.
CHICAGO – Home shoppers are showing less willingness to waive appraisals, home inspections or other contract contingencies during a home purchase compared to just a few months ago, according to the December 2021 Realtors® Confidence Index Survey from the National Association of Realtors® (NAR).
In December, 19% of buyers waived the inspection contract contingency, down from a peak of 27% in July 2021, NAR’s survey shows. For the appraisal contract contingency, 21% waived it compared to 29% over the same timeframe.
Buyers were also less willing to waive other contract contingencies, like a financial contingency (10%), a home sale contingency (8%) or a title contingency (1%).
“With home prices continuing to rise, buyers are making sure they are getting their money’s worth,” says Gay Cororaton, an NAR researcher.
The median existing-home sales price increased to $358,000 in December 2021, marking a jump of nearly 16% year over year, according to NAR’s data.
Another possible reason buyers are less willing to waive contingencies? Appraisals appear to be moving faster, Cororaton says. “With the onset of the pandemic, appraisal issues accounted for a higher fraction of contract settlement delays, from about 15% prior to the pandemic in January 2020 to a peak of 27% in July 2021,” she writes. In the past three months, appraisals comprised just 22% of contract settlement delays.
“The decline in buyers … waiving appraisal and inspection contingencies is a healthy trend,” Cororaton writes. “Buyers should pay for what a home is worth and be informed of potential issues that need to be addressed by the seller or anticipated by the buyer if the buyer wants to take the responsibility for addressing this issue at their own cost.”
Source: “December 2021 REALTORS® Confidence Index Survey: Fewer Buyers Waiving Appraisal, Inspection Contract Contingencies,” National Association of REALTORS® Economists’ Outlook blog (Jan. 24, 2022)
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