If you are a home buyer that has been house hunting within the past several years, then we likely don’t need to remind you of how low the inventory of homes for sale has been. For perspective, a healthy housing market typically has about a 5 to 6 month inventory of homes for sale at any given time. An inventory that is higher than this threshold is considered to be a buyer’s market. Meanwhile, an inventory lower than 5 to 6 months is considered to be a seller’s market. In Palm Beach County for example, the inventory of homes for sale has ticked up recently to approximately 3 months from lower levels seen over the past year.
Placing a backup contract
Given the tight inventory of homes for sale and the steady flow of Americans relocating to the South Florida area, it is still common for some properties to go under contract soon after hitting the market. For buyers that may have missed out on the perfect home because it is already under contract, this can be quite frustrating. With this said, all hope is not lost if a desired property happens to go under contract. In fact, we are seeing more contract cancellations now than we have seen over the past several years. Therefore, buyers may want to consider putting in a backup contract on a home that is already under contract. First, let’s review some common listing statuses that you will see for homes under contract.
- Contingent: This status applies to a sale that is conditional and therefore is based on something that may or may not happen. The 3 most common contingencies found in real estate contracts include: 1.) home inspection contingency; 2.) appraisal contingency; 3.) mortgage financing contingency.
- Pending: This status typically means that a formal offer to purchase has been ratified by both the buyer and seller. In many markets, a listing is moved from contingent to pending once all the contingencies in the contract have been satisfied. Typically, a home that has been moved to pending status is less likely to fall through. However, a significant event such as a job loss for the buyer prior to closing could cause the sale to be terminated.
A backup contract is a good idea in the event that a sale falls through. If the original sale were to fall through, the backup contract would take effect and you would have the opportunity to purchase the home. It should also be noted that with mortgage rates rising, we are seeing an increase in the number of contract cancellations. Therefore, a savvy buyer should be prepared for a potential cancellation.
The good news for buyers in the current market is that they will likely face less competition from other buyers on homes that they may be interested in. Unlike the housing market of even earlier this year, bidding wars are not as common at this time. With this said, it is still critically important that buyers and their real estate agents act swiftly on new properties that come to the market in South Florida. The main reason for this is that we are still experiencing growth from Americans moving here from other parts of the country. In addition, although the inventory of homes for sale is improving, it is still quite low. Properties that are in good condition and priced appropriately should still generate a lot of interest.
Are you looking to buy or sell real estate in South Florida? We can help! Let our experienced and knowledgeable team at Live South Florida Realty, Inc. assist you today! Don’t forget to also download the free Florida Home Search App!