It's worth it to work with a trusted mortgage broker

Last week I ran into a situation with clients who didn’t understand what they were signing. The fallout has been expensive for them.

The clients are selling a home in Toronto and moving to the Okanagan for a well-deserved retirement. They both grew up in B.C. and knew they wanted to move back at some point. They came out for an exploratory trip and found a patio home in Osoyoos that checked all their boxes.

They wrote an offer with a fairly standard two-week financing subject clause but they did not add a clause to make the offer subject to the sale of their home in Toronto.

They went home to Toronto and lined up financing with their bank, including a provision for bridge financing in case the sale of their home did not close before their purchase was scheduled to close. They listed their home for sale the first day they were back in Toronto. Two weeks flew by with a few viewings but no offers on their home.

In the meantime, a backup offer came in on the home in Osoyoos. My clients still had six weeks before they were supposed to close on the new home. They asked their realtor in Ontario how likely it was that their home would sell in the next few weeks. He told them it would absolutely sell, no concerns whatsoever.

And he said even if it didn’t sell, their would be options for financing.

Based on their realtor’s confidence, they removed the subject to financing clause and went firm on their purchase in the Okanagan.

One week went by. Two weeks went by. Three weeks went by.

Fast forward to 10 days before closing on their new home. Crickets. Not so much as an offer, even a lowball offer, for them to consider.

They called their bank and asked what to do to line up alternative financing. The bank sent them to a broker in Ontario who reached out to me. Based on their circumstances and the tight turnaround time, their options were limited. Most private lenders prefer larger centres and many private lenders are tapped out right now as more and more clients have had to go the private route.

After an incredibly hectic and stressful week, the clients did complete the purchase on their new home.

I mentioned at the beginning of the story that this was an expensive journey for the clients. Due to the request being so last-minute, the private lender that did provide an approval and charged an extra fee for the rush. The lawyers charged almost double for the rush. The clients now have a $3,500 a month payment on the new home, plus the mortgage payment on their current home until the current home sells. At minimum, this cost the clients more than $40,000, an amount that could have been avoided.

Over the last few years, rolling the dice on selling a home would still have been a dicey move but odds were in the sellers’ favour that their home would sell, usually quickly and often with multiple offers.With the rapid increase in interest rates however, the market has definitely cooled, making this a very risky proposition.

In previous columns I’ve talked about investors choosing to walk away from properties, and risk being sued as they felt that would be less of a hit than moving forward with a purchase where the value of the property had dropped so much. In this case, I truly feel the clients did not understand the implications of their decision to go firm without a sale in the works.

If you are considering making a move now (or ever), I cannot stress enough the importance of working with a mortgage professional that you trust. Try your best to take the emotion out of the home-buying process and consider the possible consequences if you move forward without a firm sale in place.

There will always be other homes. Losing a significant chunk of the money you have worked hard for can really put a dent in your pocketbook.

Make sure you have someone who you trust to help guide you through the process.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.