In a monthly survey of REALTORS®, the survey asks “Think of your most recent sales contract in the past 3 months that was either closed or terminated. Please explain how the deal concluded.”
The responses indicate that more contracts are being settled on time. Of the REALTORS® who responded to the January 2018 REALTORS® Confidence Index Survey and who reported a sales contract that either closed or terminated in January 2018, 75 percent reported that the contract was settled on time. The share of respondents who reported that contracts closed on time has trended upwards in 2017. For comparison, only 65 percent reported that the contract closed in time in the March 2015 survey. With more contracts closed on time, the share of respondents who reported that a contract was delayed has declined to 22 percent (from 26 percent in March 2015), while the share of contracts that were terminated decreased to three percent (from nine percent in March 2015).
Among delayed contracts, “issues related to financing” was the most common problem, accounting for 30 percent of delayed contracts. “Other” accounted for 24 percent, but an examination of the responses reveals that this also includes cases lender delays. Home inspection/environmental issues accounted for 19 percent of delayed contracts, followed by appraisal issues at 16 percent.
Cases of delay related to appraisal appears to be declining since the second half of 2017, when appraisals accounted for 26 percent of delayed settlements. The decline in appraisal issues may be related to the introduction of Fannie Mae and Freddie Mac of their appraisal-free mortgage program for purchase loans which both GSEs launched on September 1, 2017. However, there are certain conditions for appraisal-free home purchase mortgage applications. Both GSEs require a loan-to-value ratio of up to 80 percent and the loan application must have passed the automated underwriting platforms (Desktop Underwriter© for Fannie Mae and Loan Product Advisor© for Freddie Mac. The loan is only for single-family residences, either primary or secondary residence.