Buying & Selling Real Estate in a Challenging Market
- How long will I own this property? Someone looking to buy as a flip may need to be more cost-conscious than someone who is buying their “forever home”. A home is one of the best investments you can make, but if you overpay and then need to re-sell in the near future, the property may not appreciate in value enough to make your investment a smart one.
- What conditions must I include in my offer? Generally, at a minimum you will want to make your offer conditional on financing, inspection and insurance (to name a few), but in a seller’s market you may feel pressured into making a clean offer without conditions to make your offer more attractive to a seller. If you must make a clean offer, bring professionals with you to your walkthrough (eg a home inspector or agent). They can at least give you some idea of what you may be getting yourself into and what, if any, work you may need to do post-closing to bring the home to a suitable standard.
- Know your maximum budget and stick with it. If you overspend to buy, be prepared to hear that your lender may no longer fund your deal. As a general rule, try not to spend to your max pre-approved mortgage amount, as the cost associated with home ownership are almost always more than expected. Leave yourself a cushion if you can. Also remember that your lender will almost always require an appraisal of the property and this does not always match market value. This can mean you won’t have the funds required on closing and potentially land you without a home and in being in breach of contract.
- Don’t forget about closing costs. Title insurance, title search, land transfer tax, mortgage insurance, etc. These can add up quickly. Don’t lose sight of these costs when factoring your budget.
- Assuming that the highest offer is the best offer (be wary of conditions - eg offer is conditional on buyer first selling their home).
- Countering multiple offers at the same time (you may well have sold your house to multiple buyers).
- Inspection clauses - buyers will often come back seeking a reduction in the agreed upon price once their inspection is complete and defects are uncovered. You may have then missed the boat on other strong offers. A conditional offer is just that and your property is not sold until all conditions are waived by the buyer and funds are transferred on closing.
- Not following up with buyers on outstanding conditions - if they don’t waive by the deadline, the offer lapses (save for new builds) and again, you may have missed out on other offers in the interim;
While a “clean offer” is a seller’s dream, the reality is that selling a home in a strong market can be very stressful. Buyer and seller remorse are both very real things.
At the end of the day, whether you are buying or selling, be sure to avail yourself of professional assistance from realtors, mortgage brokers, and lawyers. They can help guide you through a stressful and challenging time and can ensure that your best interests and goals are being met. Do your research before presenting or accepting any offer. And remember that sometimes the best deal you make is none at all.