You might think that having won the bidding war, Paul would be quite happy. And, he was for a bit. But, here’s what happened. The housing market was quite active, and like a number of cautious house hunters, Paul was encouraged to put in an Offer on some houses. His realtor was conservative, and Paul always seemed to lose out in the bidding process.
One day, Paul went to visit an Open House. He was shown through the premises by the listing agent. Given the track record with the previous agent, he thought that this time he would go with the listing realtor as his agent. The house was listed at $649,000. Initially, he wondered whether he might submit a rather high Offer at $745,000. The listing agent said, there’s going to be a bidding war, rather than lose out again, you should put in your very best Offer, first time around. So, Paul did.
He had lost out on 3 other properties, and he did not want to lose this one. He was also told that one other prospective purchaser had lost out 4 times and was determined to get this house. Paul decided to submit an Offer at $645,000. This was a bidding war with 6 other competing offers. A clause conditional on financing, lawyer’s approval or home inspection would all be foolish, the result being that Paul omitted these cautionary items.
The good news was that he was the successful bidder. At $745,000 he had won the war! No one else had submitted an Offer nearly that high.
Question: What are the implications for Paul in this market?
Paul is almost $100,000 over asking. Will the Bank approve? What does the Bank thin it’s worth? How much will the Bank lend? Can Paul make up the difference?
You will appreciate that Paul’s deal is firm. His $50,000 deposit is at risk and he has guaranteed that if he doesn’t close, then he will step forward and make up the difference if someone pays less than $745,000.
Brian Madigan LL.B., Broker