Escalating costs and the impact of deferred maintenance mean that buyers and sellers aren’t always on the same page, so buyers are walking away, bi-coastal luxury agent Cara Ameer writes.
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Homebuyers canceled purchases at their highest rate in December, so what gives? It’s the sum of many parts and reflects the perfect storm of where we are today. Let’s face it. Buying and selling a home has gotten much more nuanced than it used to be.
People and their situations have gotten more complicated. And as for properties? Well, many have aged and need substantial repair, replacement and in some cases a total overhaul. All of this doesn’t sit well with buyers, and it’s giving them cause to reconsider.
Being in the trenches on two coasts, I’m breaking down what I’m seeing and hearing.
Interest rates
The industry can spin it all it wants, but the 6 percent interest rate (and in some cases higher, depending on the kind of loan the buyer qualifies for) is still too high. It remains a psychological barrier for many, and the principal and interest may be doable, but when you layer on taxes and insurance, the total payment looks scary.
In many cases, buyers are getting cold feet and don’t see the value for what they are paying,
“Date the rate and marry the house” was a ploy that didn’t work. Many buyers are still stuck with their “date” and not able to find much better, or the costs involved don’t make sense to refinance.
While some lenders have picked up refinances from buyers who bought over the past few years, rates are not anywhere near where many thought they would be in 2026.
Insurance costs
Insurance is at the forefront of a real estate transaction, whereas six-plus years ago, it was nearly an afterthought. Buyers used to shop around for insurance right before closing. They didn’t give it a second thought and nor did agents.
Today it’s a different story. If you work in a market impacted insurance (and the list of markets increasingly impacted by insurance is growing), you know what I’m talking about.
The insurance situation depending on where the property is located or the kind of property it is may kill the showing before the buyer even goes to look at it, and while under contract, complications can come out that can blow the deal – prior claims on the property and/or the buyer that can make insurance difficult to obtain and/or very costly.
And if the property has older systems that an insurance company may take issue with? Pay a higher premium or game over.
Insurance is giving many buyers reason for pause once they go under contract and rethinking if they should move forward.
HOA and condo dues
These are rising faster than home prices, especially in condo complexes, as a result of structural integrity requirements post Surfside condo collapse in Florida, for example, the cost of master insurance policies, special assessments for repair/replacement of major components, balcony inspections/repairs (in California), and the list goes on.
A buyer may go under contract on a condo that seems affordable, but adding on monthly condo dues kicks it out of consideration. If the condo is not Fannie Mae approved, expect less favorable loan terms with higher down payments, higher interest rates and adjustable rate mortgages versus a fixed term.
Dues typically only go one way, which is up over time, which has buyers on edge, not to mention potential future assessments.
Moving, remodeling and repair costs
The cost of moving is nothing like it was pre-pandemic. The same goes for remodeling, where labor and material costs have escalated. Buyers are factoring all of this into the big picture, and it is causing stress for many who are saying, “Do I want to deal with this?”
Sellers are still expecting top dollar
This is the elephant in the room. The drum continues to beat on affordability, but a lot of resale inventory is at a point where big-ticket items like roofs, air conditioning and heating systems, water heaters and other major components need replacement.
This is not taking into account any cosmetic remodeling/updating a buyer needs to do. Many sellers are still disconnected from the reality of today’s costs associated with buying, maintaining and owning a home and are frustrated by lower offers.
When a buyer does go under contract, an inspection reveals too many red flags that a buyer doesn’t have the financial means to deal with, unless the home is beyond “a deal.”
Buyers have more choices, especially where there’s new construction
In markets with lots of new construction options, resale homes are facing a brutal comparison test. On the one hand, many buyers want a move-in-ready home, but they don’t want to live amidst construction noise and mess all around them for months to come.
Many buyers like the idea of an established neighborhood with mature landscaping, but they don’t want an older home, and that is what they are finding. They may go under contract on an older home only to reveal a lot of expensive repairs on top of updating they wanted to do, plus higher insurance costs, and suddenly a little construction noise in a new neighborhood doesn’t seem so bad.
Buyers are demanding more bang for their buck
With overall housing costs so high, buyers are hitting the cancel button after inspections. Even if the house has a lot of seemingly little things, in their mind, they are adding all that up on top of all else they wanted to do to a home, and what buyer plans to move right in and not change a thing?
The home that they were excited about suddenly looks less attractive during inspections, and things quickly turn from stomach butterflies of excitement to stomach knots of anxiety and uncertainty.
The emotional margin has disappeared
In simpler times, buyers fell in love with a home and overlooked the flaws. They didn’t think so much about every little thing. Interest rates were lower, insurance was less complicated, and people’s lives were as well. Many buyers feel it’s too risky and too costly after dipping their toe in the water.
In markets where it is more affordable to rent versus buy, would-be buyers would rather play it safe and continue to rent with less financial worries associated with ownership.
Are agents to blame, or are consumers not following their advice?
There are plenty of agents who work tirelessly to proactively advise their clients of the good, the bad and the ugly before buying a home or what they should do before putting their home on the market.
Every seller has a story today, and most aren’t selling for a happy reason, with few exceptions. Right now, sales are triggered by death, divorce and elderly sellers going into assisted living, as well as sellers dumping long-time rental properties, electing to cash out.
They want to sell these “as-is” as many don’t have the financial means or inclination to do repairs/replacements and/or presale updates before coming on the market.
Managing expectations has always been an art, and while buyers and sellers may be listening, I’m not sure they are truly understanding, because it’s not on their radar until it is.
Some may think you are standing in their way of what they are trying to do, having them leave money on the table while pricing lower or tackling important repairs before coming on the market. While it is ultimately their decision, the agent suffers the consequences of running interference with resistance when a buyer backs out.
We are in a market of buyer truth vs. buyer revenge. Buyers refuse to overpay for anything that is in less than top-notch condition, unless it is the deal of the century, and that’s typically a price a seller won’t sell for. Many sellers continue to chase the market price-wise, even when a property falls out of contract.
The market isn’t punishing buyers for being cautious. It’s punishing sellers for being out of touch. And until that gap closes, cancellation rates will keep climbing.
Cara Ameer is a bi-coastal agent licensed in California and Florida with Coldwell Banker. You can follow her on Facebook or on X, formerly known as Twitter.
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