A new survey has found that buyers may be acting so hastily to secure a property, they may not even know what is contained within the closing documents.
The survey by Qualia, a cloud-based digital closing platform based in San Francisco, found that just one out of every five buyers understood all of the documents they were signing at closing. The report also found that 25% of buyers are purchasing homes sight unseen.
“Low interest rates and limited housing inventory sparked a competitive housing market,” the study said. “The survey highlighted how far buyers were willing to go to get the house of their dreams. Nearly a third (30%) of buyers paid more than anticipated for their home, and of those who paid more than anticipated, 32% paid $50,000 or more over the asking price. Buyers are also making what they may believe to be calculated concessions, with some removing inspections from the contract (19%) or purchasing the home without seeing it in person (23%).”
Answers from the survey also indicated that closing was the second most stressful part of buying a new home, only topped by the actual moving-in process.
Among future buyers, 25% had no idea what the closing process entailed. Qualia said that this shows how valuable local closings agents still are as they offer instant access to the information and education buyers need.
“This survey emphasizes the need for increased education and transparency during the home buying and selling process,” said Qualia CEO Nate Baker. “Our core belief is that technology that powers the transaction is the key to providing that assurance. It can simplify a very complex process to allow real estate professionals to focus on client education and a seamless home buying experience.”
The study found that despite the requirement of closing disclosures to inform homebuyers of their transaction costs, consumers still lack an overall awareness of the costs associated with buying a home, as 44% of recent homebuyers were surprised by higher-than-anticipated transaction costs.
Fully digital closings, while on the rise, are still in the minority, with only 13% of buyers completing the full homebuying process online, mainly due the slow adoption of remote online notarization (RON) tools due to market hesitancy, local legislation, and coordination between lenders and title companies.
In addition, the study found:
- 55% of future homebuyers want face-to-face information about the closing process ahead of the closing date
- 44% of future homebuyers want to complete the closing process via a secure app or online portal
- 72% of millennials in the market are saving at least $500 a month to do so
- 25% of recent buyers paid cash for their house
- 41% of future homebuyers are willing to live outside of their ideal area, up from 26% before the pandemic
- The most popular reason to purchase a new home was for more space (36%), while downsizing only represented 5% of buyers
Data for the survey was collected by Savanta Research, a third-party research firm, for Qualia in June. 1,024 people responded to the survey from a general consumer pool of people who have recently bought a home or are planning to in the next 12 months.