Ramifications of a Bidding War!
So you are buying a home, and there are multiple offers, what is your best course of action?
This is something your Realtor will help guide you through to advise what the real market value of the home is, however, it is critical to know how it impacts you for your mortgage as well.
If you have done the home buying process correctly, you’ve already spoken to a Mortgage Broker and know your max borrowing capacity, so you should check with that advisor before putting in any bid to understand what a bidding war impact means for you, however the basic repercussions of entering into a bidding war are;
Basic Potential Ramifications
- Borrowing Capacity;
- If you go above your borrowing capacity, you will have to put a larger down payment down to compensate for the difference
- House Valuation;
- If the appraisal comes in lower than the purchase price, you are responsible with coming up with the additional money to pay the difference in valuation
- Cancelling the Deal;
- If you don’t have the correct financing and appraisal clauses in your purchase agreement, you may be liable for any costs incurred by the seller for cancelling the deal if you can’t come up with the extra funds.
- Cash Flow;
- You may really want the house, but do you want to live penny-to-penny just to have that specific home?
Sometimes the market demand is high, and inventory is low so bidding wars are expected and standard practice, and that isn’t a death sentence, but it does mean you need to be prepared, and be prepared to walk away unless you can financially cover the potential shortfall.
My advise is to always talk to your Mortgage Broker before putting in an offer to really understand your max offer amount so that you know when to call an end to the bidding war.
If you have any questions, please do not hesitate to reach out to me any time.
Meghan Van Houten – Mortgage Agent, Level 2
Mountainview Mortgages – The Mortgage Centre
5038 Fairview Street, Burlington, ON L7L 0B4
Independently owned and operated