Posted in In the last 12 months in the Quinte area, property values have escalated a stunning 27.2%, with most properties under $500K selling for well over asking price (and in multiple offers). Many of my frustrated borrowers have asked whether they should make a firm offer on a property (after losing out on several bids), as many have later found out they have lost out on a home even though they had the highest offer (by several thousand dollars).
Short answer - NO NO NO!. Unless you literally have a minimum of 35% down in cash, and have already had your income pre-vetted by a lender, you may be putting yourself at risk. In a rapidly escalating market, appraised values often take a few months to catch up with what is happening in the marketplace. As such, if a lender ends up requesting an appraisal, and the value comes in lower than the purchase price, you may have to come up with the difference between the appraised value and the purchase price ON TOP OF your down payment. If you don't have the extra $$, you could end up scrambling at the last minute.
Think this won't happen to you? Just last month I had a client IGNORE the advice they were given and firmed up on a convential purchase (with a 30 year amortization) without waiting for the property to be appraised. The verdict? The appraisal came in $40K lower than the purchase price, which forced the client to put an additional $32K down in order to be able to close the deal.
Remember - a house isn't worth risking your financial future over. Conditions such as a financing clause and a home inspection are there for the protection of the buyer. If you can't win a bid on a particular home with conditions then it clearly wasn't meant to be and you should keep looking. If you realtor or banker suggests otherwise, perhaps it is time to get difference representation.
If you have a situation you'd like to discuss in greater detail, please give me a call at (613)394-5810.
