Closing a deal for your client feels like crossing the finish line, but there’s always the potential for the contract to fall through somewhere along the way.
Bright MLS, the second-largest multiple listing service covering the Mid-Atlantic region, wanted to know how concerned REALTORS® should be about this—a question that drove its recent report, “Getting to the Finish Line,” a first-of-its-kind report released by the MLS about the rate of contract fall-throughs in its coverage region, which includes all of, or most major markets in, Virginia, Washington D.C., Maryland, Pennsylvania, New Jersey, West Virginia and Delaware.
Bright MLS Chief Economist Dr. Lisa Sturtevant tells RISMedia that depending on member interest, these statistics may become part of Bright’s regular weekend updates.
“I have a chance to interact pretty much daily with real estate agents and brokers who are out there in the field. Some of them will just email me or call me and say, ‘I’ve been talking with my agents about being on the lookout because we’re seeing more contracts falling through. Is that something you track?’ And I thought, no, but we should,” says Sturtevant.
Its new report, which includes fall-through rates month-by-month starting from 2019 to present, Bright MLS found that contract fall-throughs hit their peak in 2020 and their valley in 2021. While contract fall-through rates are currently lower than they were in 2023, they’re higher than what we saw in 2022.
Across the three major Mid-Atlantic metro areas, Baltimore has consistently seen the highest number of fall-throughs, followed by Philadelphia. Washington, D.C., rounds out the list with the lowest.
Looking at July 2024 specifically, 16% of contracts fell through in Baltimore, while 14% fell through in both Philadelphia and Washington, D.C.
The regionality of fall-through rates, Sturtevant says, largely goes back to the ongoing divide between the luxury housing market (more secure) and the middle-income housing market (more precarious).
“We’re seeing markets where there are high-income buyers who are feeling very economically secure, may not be as interest rate sensitive because they’re bringing cash or because they have a home they can sell and roll equity into the purchase. That’s where we’re seeing fall-through rates the lowest,” says Sturtevant.
The seasonality of contract fall-throughs, with January being a high month, was also a factor Sturtevant noted when describing patterns.
Sturtevant says she hasn’t currently found hard data about how this compares to national statistics, but speculated it would largely be in-line. “The Mid-Atlantic is, for better or for worse, a pretty vanilla housing market. We’re like the median housing market, so in some ways I think we probably reflect what’s going on in the country.”
Her main piece of advice to agents, no matter their place of business, is that because housing is tilting slightly more toward a buyer’s market, sellers need to adjust their behavior—or else those contract fall-through rates could be on the rise.
“If you’re an agent or broker working with a seller, in general I feel like you need to tell your seller to be prepared to negotiate, to be prepared for that buyer to come asking for concessions on the buy side, always. It’s really important for buyers to have their financial ducks in a row,” says Sturtevant.
“Mortgage rates are falling now, so making sure they’re working with a lender who can provide them the most up-to-date rates and be tracking the loan product that’s best for them because I think we’re going to see rates continue to fall here over the next few months,” she adds. “And so you want to be able to capitalize on those falling rates, but while there is more balance coming in the market, it is still tough to be a homebuyer right now. I would say don’t be afraid to ask for that home inspection. Don’t be afraid to ask for help with repairs. Sellers are becoming more and more used to asking for those requests.”
Asked whether more contracts could fall through because of sellers being unwilling to negotiate or concede to buyers, Sturtevant says it’s a possibility. “The vast majority of sellers are also buyers. They’re working the other end, and so their situation may not allow for the concessions the buyer is asking for.”
Sturtevant, who believes the Federal Reserve will be cutting interest rates in September due to positive signs of lower inflation, says that consumers might be sensing the uncertainty in the real estate space right now and thus waiting to make their move. (This conversation took place before the latest Consumer Price Index, an inflation bellwether, was released.)
“This is separate from the buyer side, but I think there’s just a little bit of uncertainty out there on both the buy side and the sell side. On the seller side, we’ve seen over the last few weeks some sellers who are pulling their listing, pulling their home off the market, basically ending their listing agreement,” says Sturtevant. “And I wonder if that has something to do with what’s happening this week with the NAR settlement and kind of waiting to see what happens. So all of that is to say that there’s a little bit of uncertainty just sort of generally in the market right now, and I think it’s going to take a few weeks for us to figure out how that plays out.”
For more information, visit https://www.brightmls.com/home.
