10 reasons why Firm Real Estate offers are a terrible idea.
Demand for Real estate hasn’t been this high since 1989 and now there is pressure on buyers to put in firm offers.
The pressure to put in only firm offers started in Toronto and has now migrated north to Orangeville, Caledon and Dufferin County.
This is not only a very bad idea but it can hurt everyone involved.
- No property inspection. Not only is every property inspector out there now out of a job, but property flaws are now being passed on from the seller to the purchaser, and there is nothing the new home owner can do about that.
- You can no longer get a price reduction for any deficiencies that would have been found during a property inspection.
At least before, when there were property inspections being done, the buyer could get a reduced purchase price if a property flaw was discovered, or the flaw would have been remedied.
- You will probably lose you deposit if you don’t close
- You may be sued for damages
- CMHC will not give you a pre-approvals. That is right, CMHC will only look at “Live” deals. So if a purchase needs CMHC insurance there is no way to find out if CMHC approve or decline the deal.
- No bank, yes I mean there is no bank or lender that will guarantee you an iron clad pre-approval. They haven’t seen the property, usually they haven’t even done an income and credit verification on the client.
In most cases a “Pre-approval” is no more than a “Rate hold” (Go ahead, ask your bank, you will see)
- It puts the seller at risk of selling at a lower price. If the deal falls apart after it has been accepted, and lots are falling apart now, then it is harder, more work and more expensive to sell for top dollar the 2nd
Experienced Real Estate agents will confirm this
- Real Estate agents don’t get paid on deals that don’t close. Even though it is a “Firm” deal, there is no guarantee that the deal will go through. Sure the finance people will scramble to try to make it happen but there was no “Due diligence” to ensure that the deal was a solid one. As I said, Real Estate agents don’t get paid on deals that don’t close
- It puts the Real Estate agents at risk. If a deal falls apart and the seller does sue for damages, everyone gets sued and that includes the Real Estate agent
- It is not in the best interest for the seller or the buyer. Here is the definition of Market Value
“The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by UNDUE STIMULUS.”
If a buyer is pressured to put in a firm offer in a competitive situation, then there is definitely, “UNDUE STIMULUS”