Based on a recent article, I completely agree that these days banks are tightening their lending guidelines and some appraisals are coming in below purchase price. These bidding wars are resulting from shortage of listings supply. Plus, other factors like low interest rates are also fueling the housing demand. Just last week, I was showing a beautiful home in the Churchill Meadows neighbourhood of Mississauga.
Being priced perfectly on the dot, and because of the seller’s market we are in, this home generated multiple offers.
I was one of the buyer brokers for this property. Our bid was a good one, of course higher than the asking price (Note: this was a perfectly priced home). Upon reviewing all the competitive bids, the listing broker asked all the real estate brokers/agents to revise their offers.
Instead of revising our offer based on emotions or just to beat the competition, we decided not to revise our offer at any ridiculous price, but to use some common sense. Our revised bid went in, but we were unsuccessful. The property got sold conditional to the highest bidder.
Now here comes the punch:
I knew this was coming, because this property was fairly priced, I had a feeling that banks might not appraise the same for a lot more than its true market value.
How it normally works is that, if a subject property gets appraised for lesser than its selling price, the buyer is asked to give the difference. In the event that buyer cannot come up with the difference between his buying price, and the appraised value, the deal falls through.
Can you believe the plight of the buyer, if he/she would have waived the financing condition, just based on their mortgage pre-approval?
My instinct was right
I got a call on the fifth day from the listing agent that the buyer’s deal went sour, the deal had fallen through because of the bank's appraisal. Luckily, this buyer had not waived off his financing condition. (kudos to his real estate agent, if he was the one who suggested against waiving financing condition).
Lesson learned:
Do not get emotional, and use your intelligence (mind), rather than your heart. Think twice, before you over bid and don't think that bank's pre-approval is the final approval (this rule does not apply to buyers who have deep pockets). Make your decisions based on your trust between you and your real estate broker/agent. Listen to his/her sound advice. And do your research before you pick a good Realtor. As tempting as it may be, do not be a Mr. Know-it-all.
