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The-Mortgage-Gal

Dealing in a housing market with multiple offers can be stressful

Multiple offer competition

A topic that popped up multiple times over the last two weeks is multiple offers.

They are the good, the bad, and the ugly of multiple offer situations.

Recently, I was chatting with one of my favourite realtors and she mentioned she is working with clients who won’t look at writing an offer on a home if the selling realtor indicates there are multiple offers coming in. They refuse to get drawn into a bidding war on a property. I get that.

They won’t even look at a property if it seems there is too much interest or likely to be too many offers.

They have been looking for months and have found several great homes in their price range that tick all the boxes. They have chosen not to write any offers because there are always other offers coming in.

Multiple offers on a property by definition means a bidding war. Writing a solid offer with reasonable terms may win you the home without going into a back and forth and crazy price escalations, which I feel is more what bidding wars are seen to be.

Housing inventory is still low, and demand is still high. This isn’t going to change any time soon.

There are many great realtors who are able to navigate through this market to help clients buy their perfect homes. Realtors with a strong knowledge of current market conditions and excellent negotiation skills work tirelessly to hammer out deals that work for both their purchasers and the sellers.

I’ve talked about one family in a few columns over the course of this year. The price point they have been searching in seems to be a very popular one and homes that they have been looking at are snapped up almost faster than they can get in to view them.

I am pleased to say that after nine months and 15 days of struggle, they finally closed on their first home this week. It has been a frustrating journey for them but they are now the proud owners of a beautiful home. Yes, they wrote several other offers over the last nine months. Yes, there were multiple offers on the home they bought. And yes, the offer on this home was a stressful process.

They were firm on their maximum price because they had no wiggle room. The other offer was actually slightly higher. The seller chose their offer because they had done their due diligence, had their ducks (aka financing) well in order and they were super flexible with respect to the closing date.

I’m sure most people have no idea exactly how hard realtors and mortgage brokers work behind the scenes to help purchases come together in this crazy market.

Tapping out because there are potentially other offers coming in may mean you are renting for a long time to come.

It may not happen the first offer you write, or maybe not even the second, but trusting your realtor to negotiate an accepted offer may mean you are in your dream home sooner rather than later.



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What will the impact of B.C.'s new real estate purchase 'cooling off' period be?

Cooling off period

On Nov. 4, the Province of B.C. issued a news release outlining the plan to introduce legislation in the spring of 2022 to implement a cooling off period for people writing offers to purchase property.

The news release included a quote from Finance Minister Selina Robinson.

“People looking to buy a home need to know they are protected as they make one of the biggest financial decisions of their lives. Especially in periods of heightened activity in the housing market, it’s crucial that we have effective measures in place so that people have the peace of mind that they’ve made the right choices,” said Robinson. “With this step, we’re moving ahead to protect people and their interests in the real estate market by bringing in a cooling off period for homebuyers and looking at additional measures to ensure effective safeguards are in place.”

It also explained that the B.C. Financial Services Authority will look at other potential measures to protect consumers, including a review of the “blind bidding” system.

Is this the fix we need? What will the impact be on our housing market?

It will be interesting to watch how this affects our market. I have been fairly vocal about the crazy market conditions that clients are facing.

From the buyers’ perspective, I have seen people jumping into purchases in a frantic way because there is no time to consider options. If they find a home that is even close to suitable people have been writing offers, often well over asking price, so they can just get a home.

I have also seen offers written without a financing clause and offers written without a clause for a home inspection. Clients felt they had to write their offers this way merely to have their offer be considered by the sellers.

The long-term consequences for skipping a home inspection can be costly and so can the long-term consequences for writing offers well over the asking price, if our market sees a major correction.

From the sellers’ perspective, unless they do not need to buy another home, I have seen people pull back from selling because they are concerned about not finding a suitable property themselves. This, in turn, can create more pressure as an already short supply of homes on the market dwindles even further.

It will be interesting to see how this cooling off period impacts our housing market. I think the concept of being able to slow down and take a breath will be helpful. But, in reality, I expect that if buyers have been on the hunt for months and finally have an accepted offer, it will be unlikely that they step back from their purchase.

One aspect I do wonder about however is if we will see clients writing offers without having their finances nailed down, knowing they will have a week to get their affairs in order. I can imagine the chaos that could potentially create, where there are several purchases and sales lined up depending on each other to complete.

From my perspective, the bottom line is something needs to change.

As I say, it will be interesting to see how this cooling off period affects things — especially as it may be rolled out right in the thick of the spring market.



In the current market, buying or selling a home can be stressful

Buyer fatigue

Over the last few months I’ve talked about the pressure that home buyers are facing in our current housing market. Clients trying to buy homes are facing situations where there are multiple offers presented to the sellers, and the only way their offer will be even considered is if they go in subject-free.

As a broker, and a relatively cautious one at that, again and again I discuss the potential consequences with my clients if for some reason they are not able to find financing once they have an accepted offer with no financing subject.

I’ve had three conversations this week about what I call “buyer fatigue” – clients who are so frustrated and stressed about the process of finding a suitable home that they are ready to throw their hands in the air and walk away.

I’ve been working with an amazing young couple for over a year now. I think I may have talked about them before. They are hard workers and diligent savers. Their price point is right on the bottom end for the type of home that they need to find.

In their case, they can’t even get in fast enough to look at suitable properties before there is an accepted offer. They have written multiple strong offers on four properties this year and have been beaten out by offers that are usually $20,000 or more over the list price. There is no wiggle room for them in terms of what they need and what they can borrow.

The irony is that if they do find a suitable property their monthly mortgage payment will be almost $1,000 less than what they are currently paying for monthly rent.

The second conversation was with a senior who is looking to downsize. She is concerned that if she lists her home and it sells quickly she might have difficulty finding a suitable home to purchase and she is also concerned that if she finds a suitable new property, her current home might not sell quickly.

This is the situation many clients find themselves in. If they do find a something they’d like to buy, how can they write an offer if their current home is not already sold?

In this case, I asked if the client has family she could stay with temporarily if her home sells before she finds something to buy. I think this may be the route she chooses for now.

The third conversation was similar to the second, except this client listed his condo for sale anticipating it might take a month or so to sell due to the location. But his condo sold in a week after multiple offers. Interestingly, he did not accept the highest offer (which was subject-free) but instead went with an offer that had a subject to financing clause. This decision was based on the flexibility of the potential purchaser.

They set a closing date in February to allow my client time to find a suitable home, with the understanding they could move the closing date up if he found something sooner.

Now my client is trying to find something that checks all the boxes. He does have close friends to stay with in case he doesn’t find something right away which takes away the pressure of making a snap decision.

What if you are thinking about selling and concerned about financing a new home, never mind finding one? Can you move forward with a purchase if your current home hasn’t sold?

If your current home is mortgage-free, or even has a relatively small mortgage, there are options available to you (depending on your overall financial picture).

Sometimes having a conversation with your mortgage person to discuss options available to you can put your mind at ease and help you move forward while all of the pieces fall into place.

And sometimes taking the right offer as opposed to the highest one may be what you need to do to buy yourself a little peace of mind.



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When it comes to mortgages rate is not always a deciding factor

Cheaper not always better

Over the last two weeks, we’ve seen several lenders drop their fixed five-year interest rate.

When deciding where to place my clients’ mortgages, rate is only one piece of the puzzle. It is an important piece, of course, but not necessarily the deciding factor.

I’ve talked about this previously and feel it warrants revisiting.

Many of the mortgage lenders offer both a standard mortgage product and a cheaper no-frills mortgage. By cheaper, I mean the no-frills options are generally priced about .05 per cent less than the standard mortgage.

Differences between the standard mortgage product and the no-frills option can include:

• Higher penalty for breaking the mortgage early, either to refinance or port to another home

• Extend and blend may not be an option (ie: a refinance without penalty part way through the term)

• Any increase or port of the mortgage means a penalty charged

• Mortgage is not assumable

• Mortgage is not portable

• May require a bona fide sale to break the mortgage (ie: no early payout permitted)

I have only put clients into a low-rate option twice (at their insistence) and both times they have been in the position of needing to break those mortgages prior to maturity.

We were able to find a great solution for one of the clients, and the other had to pay a penalty she could have avoided had she chosen the standard mortgage instead.

If you have been holding off purchasing a home or refinancing your current mortgage, now may be the time to have a conversation with your mortgage person.

We have a great calculator that can show you whether it makes financial sense to do an early renewal or whether it makes more sense to stay the course with your current mortgage.

A few minutes speaking with a professional may save you thousands of dollars in the long run, or might reassure you that you are already in the right mortgage.



More The Mortgage Gal articles

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About the Author

Tracy Head and Laurie Baird help busy families find mortgage solutions. Together they have more than 45 years of experience in the mortgage industry.

With today’s increasingly complicated mortgage rules, Tracy and Laurie spend time getting to know the people they work with and help them to better understand the mortgage process. They support their clients before, during, and after their mortgage is in place.

Tracy and Laurie work closely with their clients, offering advice and options. With access to more than 40 different lenders, Tracy and Laurie are able to assist with residential, commercial, and reverse mortgages in order to match the needs of their clients with the right mortgage package.

They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit www.okanaganmortgages.com

Visit their blog at www.okanaganmortgages.com/blog

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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