Most Realtors I speak with on a day-to-day basis have buyers starting to stack up like cordwood, and a very limited supply of properties to show said buyers.
Turns out the Pacific Ocean, US border, North shore mountains, and the ALR all remain intact. No expanded land supply in the Lower Mainland. Thus, no expanded supply of properties to market. Yet migration and immigration numbers remain strong, largely due to strong employment numbers and – despite the recent sub-zero temperatures – a pretty awesome climate in general.
Strong demand, strong employment numbers, and limited supply. Which leads to what in the months ahead?
Most likely it leads to several buyers feeling immense pressure to write subject-free offers. Perhaps the single worst idea in real estate.
Frankly, if the BC government truly wanted to do something to cool the market they would implement the same policy for used property transactions as exists on sales (and pre-sales) of brand new properties – a mandatory 7-day rescission period – a forced time of cooling-off during which one can get their finances in order, perform a property inspection, etc.
Think about this: In BC one cannot write a subject-free offer on a new build unit. And so there are no competitive bidding wars (lineups for three days in advance, yes, but risky binding contracts, no). In other words, the one type of property that presents the least risk – a brand new build subject to current building standards, fully inspected by the city, and covered under warranty… this is the one you cannot write ‘subject-free’ on.
Yet our policymakers think it is A-OK to walk across the street and write a blind-bid offer, perhaps paying 10% more than the next-closest offer, on a 100+ year-old house containing asbestos tiles, poly B piping, vermiculite insulation, knob-and-tube wiring, unauthorized renovations, work not done to code, etc.
Yeah, that’s totally cool. Go crazy.
If you are thinking that the industry loves this subject-free, rush closing date environment, you would be incorrect. Realtors, appraisers, lawyers, notaries, bankers and Dominion Lending Centres Brokers alike would all be quite happy to see some form of legislation implemented to slow buyers, and perhaps slow the market down in general. Removing the mechanism that creates this market madness would be applauded by all corners of the real estate industry.
A pre-approval is not worth the paper it is printed on, and once again this coming spring several buyers will succumb to the pressure to write subject-free offers based on a misunderstanding of how little validity a ‘pre-approval’ has. Hard lessons will be learned.
There is only one time that a buyer should even consider writing a subject-free offer, and that is when they have the capacity to close the purchase with cash. Otherwise, always insert into an offer a ‘subject to the buyer obtaining satisfactory financing’ conditions. Cover your buttocks.
Get ready for another rocking and raging spring market.
Courtesy of Dustan Woodhouse, AMP – DLC Canadian Mortgage Experts