With many buyers backing out of home purchase contracts, sellers are offering a variety of incentives to entice them to close their deals.
Buyers received concessions in about 35% of home sales during the three months ending Oct. 31, according to a recent report from Redfin. It's not much different than the 35.9% last year, but it's up from 27.6% two years ago.
"Sellers have become more open to the idea of giving out concessions like cash for repairs and mortgage-rate buydowns in part because many of them want to get their homes sold quickly due to major life events like divorces and new jobs," said Seattle Redfin Premier agent David Palmer.
About 53,000 home purchase agreements were canceled in September - about 16.3% of the homes that went under contract. That's the highest percentage of cancelled contracts since October 2022 when mortgage rates surpassed 7% for the first time in decades.
And with mortgage rates hitting their highest level in 23 years in October, demand from buyers is drying up, prompting sellers to throw in freebies.
"House hunters are pickier than ever before," Palmer said. "It's really expensive to buy a home today, so they want to make sure they find the right one. Buyers have become increasingly likely to terminate a deal if they don't get the concessions they want."
Another reason sellers are offering concessions is because homebuilders are offering deals as they try to reduce inventory. More than 30% of the single-family homes for sale in the third quarter were new construction - the highest share of any third quarter on record.
Dropping Prices
In addition to offering concessions, some sellers also are dropping their asking prices. Of homes sold during the three months ending Oct. 31, 14.4% had a final sale price less than asking.
Concessions are most common in Salt Lake City, where sellers offered them to buyers in 63.3% of home sales in the three months ending Oct. 31. Also in the top five are San Diego, 60.9%; Denver, 56.6%; Las Vegas, 54.3%; and Raleigh, North Carolina, 51.4%.
Boston had the lowest share of concessions at 11.1%, followed by San Jose, California, 14.4%; New York, 14.5%; Philadelphia, 15.7%; and Chicago, 19%.
"The good news for buyers, aside from more concessions, is that contingent offers are also more feasible in a market like this, meaning house hunters don't have to waive inspections and other important safeguards," Palmer said.