Home purchase cancellations remain elevated

By Sarah O’Brien | CNBC

KEY POINTS

  • In August, 15.2% of home purchase agreements fell through, similar to 15.5% in July, according to a new report from Redfin.
  • The average mortgage rate reached 6.7% last week, up from 3.3% heading into 2022.
  • It’s important to know if you can walk away from your agreement without losing your deposit.
  • Patchogue, N.Y.: A home for sale, under contract, on Center Street in Patchogue, New York on May 17, 2022.

Amid higher interest rates and a softening housing market, home buyers are continuing to back out of purchase contracts at an elevated rate.

About 64,000 home-purchase agreements were canceled in August, according to a new report from Redfin. That’s equal to 15.2% of home contracts initiated during the month and similar to the 15.5% canceled in July. A year ago, the share was 12.1%.

If you’re considering joining the ranks of those who walk away from a deal in progress, it’s important to know whether it will cost you to do so. Or, if you haven’t yet signed a contract but are nearing that point, it’s worth determining if you can cancel at some point in a way that doesn’t result in forfeited money.

Your deposit may be at stake

Typically, buyers provide what’s called an earnest money or “good faith” deposit when an offer is made on a home, although the specifics vary from state to state. The amount is usually 1% to 5% of the purchase price but can run as high as 10% depending on the local market.

The deposit is kept in an escrow account and goes toward your down payment or other closing costs when you finalize the purchase at settlement.

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