Yes…….Some buyers lose.
By Lynda Cox
Only one offer can be accepted. If 4 offers were submitted then 3 buyers are disappointed and must keep looking. Some buyers have completed 2 to 5 pre-offer building inspections at approx. $575 a pop, on different properties before having a successful bid. In the end, once the successful bid is announced the losing buyers “kick” themselves for not going just that little bit higher. If only they had known. Blind auctions are like that. You never know what someone will pay. This process can be very discouraging and some buyers quit for a while before starting the house hunt again.
Some buyers get caught up in the moment especially if they have lost out before, they can get reckless and offer too much. How can you tell if it’s too much? The answer is….you can’t. Remember, a home is worth whatever a willing buyer wants to pay. The buyers’ lender will never do an appraisal before the offer is submitted. So what happens when a buyer DOES pay too much, with no conditions, and the bank appraisal, completed after the offer is accepted, comes in at less than the price they paid? This can be very tricky. You can ask for another appraisal at your expense but if the numbers still don’t jive then the buyers are on the hook for the difference. YES, the buyers will only get a mortgage based on the appraised value and can be left having to come up with the cash themselves to make up that difference.
You can see why buyers in this position must be very confident of their financial situation. They often have more than the 20% downpayment in savings or have an inheritance to lean on.
NOTE: If you pay too much but you plan to live in the house for a very long time then NO PROBLEM. The downside can happen if you have to move after a short time, before your home has had time to increase in value beyond what you paid for it. Then, unless the market has gone up a great deal more than the normal 5 or 6% you could take quite a loss. Hence, buyers in bidding wars are usually banking on the notion that this is their FOREVER home. They have time to pay off the excess.
There is an upside to losing out in a multiple offer situation. Buyers tend to get smarter. They realize that next time a great house comes along they will do their mortgage approval and building inspection before submitting their offer to give them a better chance by “going in” unconditionally. They might push the price point a little higher than their last bid.
Finally, in my experience, most buyers eventually find the “right” home andare happy that they lost the others.
Lowertown Update:
Since May 8th Lowertown has experienced 6 bidding wars. 88 Wurtemburg, 303 St. Andrew, 14 Lower Charlotte, 333 St. Andrew, 141 Dalhousie and 316 Bruyere #313. Buyers paid from as little as $100 over asking price to $58,000 over asking price.
From May 8th to August 15th there have been 23 Condo Sales, and 12 Residential Sales
As of August 15th there are 9 active Residential Listings, 73 Condo listings, 7 Conditional condo Sales
Lynda Cox is a Sales Representative with Faulkner Real Estate