67% of California Sellers Sold Their Homes Due to Inability to Pay Mortgages, Says C.A.R.

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(LOS ANGELES, CA) -- Changes in family and employment status as well as adjustments to monthly mortgage obligations played significant roles in California's homeowners' decisions to sell their homes in 2009, according to the California Association of Realtors' (C.A.R.) "2009-2010 Survey of California Home Sellers."  According to the report, 67 percent of all sellers in California did so as a result of difficulties related to meeting their mortgage obligation.

"Tighter underwriting standards and a decline in equity continued to impact the market in 2009," said C.A.R. President Steve Goddard.  "Many homeowners chose to sell last year because their adjustable-rate mortgage reset at the same time home prices were experiencing an unprecedented decline, leaving them with little equity and difficulty in qualifying for a refinance."

"Sellers responded to the challenges of the housing market in 2009 by choosing to work with a Realtor for guidance and assistance in navigating the complex market," added Goddard.

Recognizing the value of working with a real estate professional, 99 percent of sellers chose to work with a Realtor, according to the survey.  Of those, 72 percent cited the ability of an agent to sell the home at a higher price point as the primary reason.  Other reasons included better marketing and exposure (38 percent), while 28 percent reported it was too difficult to sell the home independently.

On average, homes sold for $20,958 less than the original asking price in 2009.  The median difference between the selling and listing price was $32,315; the list-to-sold-price ratio was significantly larger between first-time sellers ($30,000 below list price) and sellers who had previously sold a home ($8,000 below list price).

The percentage of first-time sellers grew to nearly half of all sellers (44 percent) in 2009, a 33 percent increase from 2008, and nearly three times the 2007 percentage of 15 percent.

Sellers in 2009 cited difficulty meeting the monthly mortgage obligations (30 percent); job loss (18 percent); and "mortgage payment increased" (15 percent) as primary motivation to sell.  By comparison, in 2008, one in five sellers cited the ability to meet their mortgage payment obligation; while 11 percent sold due to financial difficulties.

Financing challenges also extended to home buyers and impacted sellers' confidence in buyers' ability to secure a home loan.  Nearly three-fourths of sellers reported this as a concern, an increase from 54 percent in 2008.

Financial difficulties also impacted the ability of sales to close on time, with 63 percent of homes falling out of escrow prior to closing.  Nearly 70 percent of sellers cited "buyer could not get an acceptable mortgage;" and more than 60 percent said "buyer backed out," as the primary reasons the home fell out of escrow.  Other reasons included: Buyer's remorse (26 percent); "lender withdrew and did not fund" (24 percent); and "home prices continued to decline" (18 percent).  Once the home did sell, 50 percent of sellers reported escrow did not close on time in 2009, compared with 36 percent in 2008.

 

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