I work with a lot of buyers. Whether a person is an experienced buyer or a first-time buyer there are always a lot of questions. Things change in the market quickly and frequently so, a buyer who has bought and sold several times will still have questions or require a refresher in the how-to’s. For first time buyers everything is new. It’s great to meet and go over the questions buyers have. A lot of them are common questions I get asked all the time. I thought this month I would share these and my answers.
Q: Where do I/we start?
A: I always tell buyers the first step is financing. Let’s get you in touch with your mortgage broker or mortgage specialist and get the pre-approval done. I can’t stress enough how crucial it is to have your pre-approval done. Some buyers want to assume what they can shop for. In my opinion this is not wise, no one knows how the bank will look at your debt load etc. and with the newest mortgage rules even people with homes already must meet the new lending requirements no matter how much they are applying to their new purchase. So, let’s just be extra thorough and start there. You shouldn’t be submitting offers without a pre-approval done and why get your hopes up looking at house that you don’t know if you can buy anyways?
Q: What’s next?
A: Let’s get you familiar with the market. Starting with a search that will start to show you what’s available in your budget that meets the criteria you’re looking for. In a market like we are experiencing in Peterborough these past months a listing price is one thing and in many cases the selling price is another… and not to the benefit of the buyer.
Q: What does “holding offers” mean?
A: “Holding offers” implies that a house is listed on MLS and an offer presentation date is set for about a week later. The house is shown throughout the week to interested buyers and on “offer day” those who would like to submit and offer on the house which are then reviewed by the Seller and their agent. The most pleasing offer to the Seller is accepted and you have a sold or conditionally sold house.
So, going back to the previous offer, the listing price and selling price may be completely different due to bidding wars that drive up the price.
Q: How much do these houses go over?
A: It all depends on the inventory available in that price range, the desirability of the house and the number of interested people in it. Some houses sell for $10,000 over and we’ve seen them sell for $100,000 over asking.
Q: How much do you think it will go over?
A: There is no formula to this and no one has a crystal ball to predict these things. It really comes down to how badly someone wants the house and what their budget allows them to do to secure the house they want. Here is where I would go further on about this to my clients to help them come to the value of their offer.
Q: Can we find out what the other people are offering?
A: No. What we will know is how many people you are bidding against. The listing agent must inform all agents submitting offers how many people their client is competing against.
Q: Can we do a home inspection?
A: Depends. In an ideal world the answer is always yes. Sometimes (in my opinion should be always) if a house is holding offers there should be a Pre-List Home Inspection done on the subject property but why that is not true in all cases my clients will hear about in a separate rant. When an inspection is provided the buyer has a chance to review it with their agent prior to submitting an offer on the house. When there is not one done and offers are being held it can sometimes be difficult to get the condition accepted in your offer if the others you’re competing against are clean with no conditions.
Q: Can we have conditions?
A: See answer above. Unfortunately, when the market is very competitive the winning offers are often clean without any conditions. Not always the case but it’s more common than an offer with conditions.
Q: What if the house we like is NOT holding offers:
A: Then it’s your lucky day and I advise you act fast and get your offer submitted ASAP before someone else does the same and you still end up in competition. This is the glory day in a market like this where you can secure a home with conditions in your offer. If your agent doesn’t drop everything and draft that offer for you immediately you should drop them.
Q: How long do I have for conditions like financing and home inspections?
A: Typically, a week to ten days is enough time. Sometimes the bank asks you to ask for 10 business days (2 weeks) in your offer – good luck with that. If you want to get an offer accepted understand that the Seller is not going to want to wait for 2 weeks to hear back on whether your financing works out. Using a competent mortgage broker or specialist is all you need to ensure you can complete your financing condition within a normal time frame.
Q: Should we view homes below our max budget?
A: There are two things I ask buyers to consider with this. One, is that if you are losing out on houses in bidding wars because there’s no room to go up between the list price and your max budget than yes, look at houses that are a bit lower and factor in things that you’ll need to update and so on. Two, just because the bank told you what your maximum approved purchase is doesn’t mean you feel comfortable with the carrying costs of a mortgage that high and how it impacts other areas of your life. Look at what is a comfortable amount for you to spend on living monthly and take into consideration that no one likes being “house poor” and have no extra spending money for the other things that bring joy to your life. Seriously, let this be an important decision you make.
Q: We don’t have a lawyer… how do we get one?
A: There are lots of great, competent lawyers in town and I’ve never known any to turn away business. Most lawyers in the city are competitively priced so there’s not a great need to shop around. Instead ask family, friends and me for some referrals – we’d be happy to point you in the right direction.
Q: We found a place, what do we do now?
A: We start discussions on what an offer looks like? What is the availability, can we submit right away? What conditions are being included and when would the seller’s like to close, does it align with your timelines too? Then I begin to draft the paperwork and we get together and go through it step by step… which leads to many more questions, but this blog post must end sometime so we will wrap this up here.
Q: Our offer got accepted, what do we do now?
A: First we deliver the deposit cheque (most companies take EFT, wire or personal cheques – doesn’t have to be certified) within 24 hours of acceptance (make sure your deposit amount is something that you can liquify within that time). We send the accepted offer and listing to your mortgage agent or broker, insurance agent and lawyer. Then we book the home inspection if we are having one. Once all conditions are satisfied we notify the Seller and their agent with a Notice of Fulfillment and then once all parties have signed this form the lawyers and bank receive it making this a firm sale!! Now the stress is off, you start packing and picking out paint colours – just make sure not to kill your credit score before closing. No CRAZY spending!!
If you have any questions that were not addressed in this blog, feel free to leave me a question in the comments, or send an email.
Signing off from the Electric City,
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I believe a home inspector would be a great help for someone to decide whether they purchase the house or not.