Buyer's Beware....Don't rock the boat too hard and tip it.

Was that a catchy title? Maybe I'm getting better at this?

Here's the deal. We've talked about the lack of inventory primarily in the central Toronto core. It doesn't take an economist to understand that if prices are going up and interest rates are still at all time lows AND it's springtime AND there's a lot of buyers needing roofs over their heads....then there's going to be competition for good homes. Good homes may be defined as those near transportation or major arteries, with parking; decent layouts; updated (either by way of mechanics or by renos OR both).

So, I like many agents have experienced a number of multiple offers over the last few months. Always nice sitting with the Sellers on these nights. The Buyers duke it out until 2 are left standing. The 2 (or maybe 3) combat UFC style for the house with the ultimate winner crowned.

Here's where the "don't rock the boat" part comes in! Buyers may fall in love with a house, know they can afford it, be tired of losing and decide to go "all in" to win the house. So, they spend a "big buck". "Big bucks" may be okay if it's the "right" house for the buyer given their budget and their circumstances and assuming they've done their homework and then some. However we need to distinguish "big bucks" from "sky high dollars". The latter can be the "boat rocker". The latter can create an issue that both the Buyer and Seller (yes Seller too) may need to think about.

You see, if the Buyer is getting mortgage financing (especially if the Buyer isn't getting a conventional mortgage and is putting the house in the care of CMHC hands to be insured)...there will be an appraisal done. Now, if the bank disputes the value paid for the house, the Buyer may find themselves either shopping for other sources of financing OR figuring out quickly sometime near closing how to increase their downpayment to make up the difference they thought the bank was financing!

Appraisals are often finalized weeks before closing, so the Buyer and Seller often don't know until there's little time to correct. In some cases, little can be done and the deal doesn't close. Is this happening? It is.

I'm very adamant with my Buyers that they stay well within a reasonable range and encourage them to have open communication and cement a strong relation in this kind of market, with their banker/mortgage specialist.

So, Buyer's this should be good news to you. Get out there. Again, do your homework. Know your budget and have a good grip on market values and comps. If your agent can make you see where he/she is getting his/her valuations from and it makes sense to you---great. If you get the feeling your agent is looking to get paid and they're encouraging you all to quickly to put that "huge number" on the offer...ask yourself if this is the best move for you.


Happy March Break to those lucky enough to have time off. For the rest of you, it's a great time to give me a call and talk about the market.

Visit my website http://www.TheSmithsBuyAHouse.com

Best,

Michael Gruenstein MBA CSC
ReMax Realtron
416.271.2066
mgruenstein@trebnet.com
http://www.TheSmithsBuyAHouse.com