Bay State buyers who’ve been eager to purchase a new home in recent months have frequently run up against one pesky roadblock: They have their own home to sell.
That’s meant a good number of them have put off buying until they get a solid offer on their home.
“Two or three years ago they didn’t worry about selling their own house. They kind of assumed they would be able to,” said David S. Drinkwater, president of Grand Gables Realty Group in Scituate. Today, with the hot seller’s market that the region experienced a distant memory, Drinkwater is encountering more buyers who are waiting until their home is sold before they start looking.
“The good news that I see is that buyers today are more optimistically cautious about the marketplace. But they’re still not comfortable enough Â… to proceed with buying a home without having their house sold,” he said.
That could explain why despite a decline in home prices in most parts of the state, home sales have failed to post a big rebound. Sales of single-family homes statewide were relatively flat during the first quarter while condominium sales slipped about 4 percent, according to data from Banker & Tradesman’s parent company, The Warren Group.
A survey released by Credit Suisse in April reported that 30 percent of new home-purchase cancellations were caused by buyers’ inability to sell their current home. That was up from 26.1 percent in March, a 15 percent increase.
“There’s obviously no question that if many buyers have something to sell and if they’re not confident they’re going to sell it, it slows down the market,” said Fred Meyer, owner of University Real Estate in Cambridge.
Local Realtors say buyers have some advantages. There are still plenty of homes to choose from and sellers are reducing prices or sprucing up their homes to attract attention. There was a 10-month supply of single-family and condos for sale as of April, compared to an 8.5-month supply in April 2005, according to the Massachusetts Association of Realtors. But inventory levels have dropped from last year when there was almost a 13-month supply. A market that is considered balanced for both sellers and buyers has a 7.5-month to 8.5-month supply.
“My first-time homebuyers definitely have a better go of it because they do have more choice and they don’t have a house to sell, so they can get a pretty good deal,” said Georgia Taft Pye, an exclusive buyer’s agent in Duxbury.
Taft Pye said she has clients who have had difficulty purchasing because they have a property to sell. Taft Pye, owner of Buyer Brokers of the South Shore, is working with a couple who have been trying to sell their Pembroke condo since January. The couple, who wanted to move because they are expecting twins, found two homes they liked but the sellers refused to accept a home-sale contingency.
In another case, Taft Pye is working with a woman in her 70s who wants to downsize. The woman, who’s lived in the same home for about 30 years, put an offer on a home with a home-sale contingency. But the contingency included a so-called kick-out clause that enabled the seller to continue to market the home and accept another offer without a home-sale contingency unless the original buyer agreed to withdraw the contingency.
Taft Pye said the kick-out clause had lasted only 12 hours when another buyer emerged and her client wasn’t willing to withdraw the home-sale contingency.
“It’s definitely a domino effect,” she said.
‘An Impediment’
Doug Azarian, a Cape Cod real estate broker and president of the Massachusetts Association of Realtors, said a good number of purchase offers he saw on the Cape in the first quarter included home-sale contingencies.
“Some sellers were saying yes [to those offers] but most were saying no,” said Azarian, of Century 21 Dream Homes in Falmouth. Azarian said he saw a number of transactions that went under agreement and were subject to the sale of a buyer’s home, but they included kick-out clauses.
But Azarian doesn’t think those home-sale contingencies had a big impact on the spring market. In most cases, buyers were able to sell or the seller has been able to find other buyers, he said.
That was true of a builder who was trying to sell a newly constructed home in Ballymeade Estates, a golf course community in Falmouth. Azarian said an agent in his office marketing the home, which was listed for over $1 million, got an offer with a home-sale contingency and kick-out clause attached. The builder accepted the offer but within three months another buyer emerged and the original offer was withdrawn. The home’s closing is scheduled for this month.
In some parts of the state, listing agents wouldn’t even think of advising their clients to accept purchase offers with home-sale contingencies. In Cambridge, most sellers won’t accept such offers and buyers don’t make them, according to Meyer.
Meyer said many buyers are relocating to Cambridge for jobs at the Bay State’s universities and are not dependent on selling their own property anyway.
“Unless the seller is truly willing to take a gamble and has no alternative, it just doesn’t make sense to forgo all other possibility of a sale by accepting an offer with a contingency,” he said.
Jeff Hall, a Worcester Realtor, said he tells buyers who need to sell a property not to assume that their home will sell quickly.
Even if buyers are financially comfortable and can carry two mortgages, he said they have to be aware of the “stress level of having multiple properties,” said Hall.
For sellers, Hall doesn’t think it’s wise to accept home-sale contingencies. “It’s an impediment to marketing to other people,” said Hall, who is an associate broker with RE/MAX Advantage 1 and vice president of the Worcester Regional Association of Realtors.
Just a few days ago, Hall showed about 33 homes to a couple relocating from Maryland. He said he immediately deleted any listings that were flagged as having received an offer but were accepting backup offers.
“We can’t afford to waste time with properties with contingencies,” said Hall, noting that his clients need to make a decision quickly.
Buyers who need to sell are often making home improvements to make their property more appealing because today’s homebuyers don’t want to spend time remodeling, Hall added.
Buyers who do find themselves in the predicament of needing to sell a property in order to purchase can take advantage of some programs that companies offer.
Nelson Zide, senior vice president of Whitinsville-based ERA Key Realty Services, said his company has a seller security plan that offers to buy a client’s home for 90 percent of appraised value if the home hasn’t sold within six months.
“It’s a nice safety net and it enables us to continue marketing the home,” he said.
