Pre approve your mortgage

Spring season is beckoning, and with it comes more home listings and more headaches for buyers wishing to buy their dream home. The past couple of months have been characterized by low levels of inventory in prime locations, and multiple offer battles on prime properties have been seen on all fronts.

Realtors from all over Toronto; from the east in Whitby and Ajax, to the north in Aurora, to the west in Oakville and Burlington, and of course, south of the 401 are all telling me tales of woe as they lose bidding wars for their clients.

Edward and Shauna have been stalking Aurora for the past few weeks. They are moving up from a rental apartment in Richmond Hill, and have their sights set on either a townhouse or a semi-detached home in the burgeoning east side of Aurora.

They first set their sights on a nice semi-detached home on Primeau Drive. It went on the market January 31, but by the time Edward’s agent noticed it, there was already a conditional sale. By February 14, the home was sold for its asking price of $369,000.

On February 23, another nice semi-detached on Hollandview Drive went up for sale for $349,000. The next day, their agent Christophe arranged an appointment for first thing in the morning. They loved it as soon as they saw it. It was larger than they expected, situated directly across the road from a public school, and close to all amenities.

The home was tenanted, and the tenant was there when they arrived. She was very friendly and told how they were very sad to leave, but the owner had indicated he had to sell, and they understood they could soon be out of a home – so she had already arranged a rental house elsewhere for April 1.

The Hollandview home was in move-in condition – in fact, the tenants themselves had installed hardwood flooring on the main level, and painted most of the rooms too. Shauna grabbed Edward’s arm on the way out the front door, and said “let’s grab this before others see it.”

Their agent was pleased to hear this, and suggested they not “cheap out” on their offer – saying this is a real steal; go in at $345,000 and see what happens.

Without hesitation, the happy couple agreed, and waited for Christophe to prepare their offer. He called back very shortly after and said – “actually there are already two offers on the property. I think you had better increase your price.”

Shauna asked “what price do you suggest?”

Christophe suggested $355,000, and with few, if any conditions. The idea now was to make the couple’s offer as ‘clean’ as possible, relative to other offers.

He confirmed they had been pre-approved for a mortgage comfortably above the amount needed to close this house. He suggested they do not insert an inspection condition, even though that is the norm for a twelve year old house. “We’ve seen everything, and it all looks in good shape. The tenant mentioned the AC unit is a bit wonky, but everything else looks fine.”

Early that afternoon, Christophe arrived to present the documents for their signature. He looked a bit sheepish. “Um, it turns out they are not accepting any offers till 5 pm this evening. I should have realized this home was priced deliberately below market to attract a lot of attention. The seller has no interest or expectation of selling this house for his asking price of $349,000”

Edward took this in stride. “So what do you recommend Christophe?”

Christophe put on his game face and said, “Well, we know they expect multiple offers, so we have to ignore everything we were thinking a few hours ago, and look at this with a fresh pair of eyes. The last semi we liked was a bit smaller than this and sold for $369,000. I imagine the owner wants to get at least that much.”

Shauna responded “So do you think we should come in at that price?”

Christophe replied “No I don’t think that will be necessary. Let’s try $361,000. We’ll put up a $10,000 deposit; we will have no conditions at all; and we can be prepared to close even before April 01 if that is desired by the owner.”

Edward was skeptical. “I think we should blow everyone away with our offer. If this house had been priced initially at $369,000, we would still be happy to make an offer, and be pleased to get it for that price. Surely others will think the same way. We are lucky we can afford a bit more, I say let’s come in at $372,000”

Some discussion ensued, but Christophe’s suggestion was the one they ran with – after all, he is an experienced realtor – he should know best.

Edward and Shauna went back to work and tried not to think too much about ‘their’ new home. As five o’clock approached, Shauna took their young son out of daycare, and went to the local walk-in clinic to get his flu-like symptoms checked out.

Edward was called to a late meeting at his work, so neither was available to answer the phone. It turns out Christophe was frantically trying to reach them. The 5 pm deadline was rapidly approaching, and he now knew there were already seven offers waiting for review. Clearly, Edward had been right – $361,000 was not going to get the job done. They had to modify their offer now, before it was too late.

Often when a home is priced to sell like this, the listing realtor will give the top two or three bidders a second chance to improve their offers, even if she likes the highest offer presented. It costs nothing, and can often result in extra money for the seller. However, in this case, the listing agent was clear to Christophe. There would be no second chances. She was going to review all the offers with her client at 6 pm, and simply select the best offer, and not give any second chances to anyone else.

By the time Christophe was able to reach Shauna and Edward, the deadline had already passed, and they waited forlornly for the result. Sure enough, they were advised by 7 pm they had not been successful – in fact the winning offer was $370,000.

And so it’s back to the drawing board for this frustrated couple. There is presently nothing attractive on the market, and they are concerned that pursuing every new listing will prove just as frenetic. They hope they have all learned some lessons from this recent experience, and will soon be accepting the keys for their new dream home in Aurora.

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