Why is 'Contingency Clause' the Term of the Day?

Redfin

Earlier this month, real estate brokerage Redfin reported that nearly 63,000 home-purchase agreements in July, or 16.1% of homes that went under contract that month, were called off. This is the highest rate in over two years and the third-highest percentage on record since 2017.

The housing market has slowed sharply as higher mortgage rates and prices make housing less affordable. Home sales fell 5.9% in July and 20.2% from the year prior, in the sixth straight month of decline, according to analysis from the National Association of Realtors (NAR). Redfin reports that in this environment, buyers have been much more likely to ask for contract contingencies that allow them to back out without penalties, in addition to reductions in price and repairs. And if sellers refuse to meet these requests, buyers are increasingly calling off deals to look for other options.

However, there’s no guarantee that buyers who back out will necessarily find better deals. While annual home-price growth has begun to slow, prices are still significantly higher than they were just a year ago. Per the NAR, the national median existing-home price for all housing types was $403,800 in July, down $10,000 from June’s record high of $413,800, but still up 10.8% from a year ago.

-Ward