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Thursday, 19 July 2012

How to safeguard yourself in a home bidding war

Once your mortgage financing has been secured, finding a home you love is an exciting part of the process. It is easy to get swept up in the excitement of it all, and it is also commonplace for a listing agent to indicate there are other offers to stimulate a faster response from a client. A trend that has emerged and is gaining a lot of media attention, is bidding wars that emerge with only one bidder. Recently, a Toronto couple 'won' the bidding war on their desired property with a bid that was $90,000 over the asking price. They discovered after the fact that they had been the only bidders. In this article from Moneyville, we learn there are methods to protect ourselves against these situations.

The law does state that in the event of a bidding war, an agent must inform all bidders how many offers have been made. However, bidders names and offer amounts are never disclosed. A practice has been recently developed in Toronto for the buyer's agent to call the seller's agent to inform them a formal offer will be made later that day, although the potential buyer can always back out. This can result in a seller receiving several 'registered offers' throughout the day, with no guarantee any will actually become a legitimate bid. Still, a listing agent may tell potential buyers there are several offers, in hopes of encouraging them to make one as well.

So how can potential buyers protect themselves? Mark Weisleder, a Toronto real estate lawyer, has developed a bidding war clause that has proven very useful. The clause states that the buyer is making an offer based on the belief that other offers will be received that same day, and goes on to say that if there are no other offers received by a certain time that day, the buyer can rescind the offer or change the price. If the buyer's offer is accepted, the seller must provide the name, address and phone number of the real estate agent that presented the other offer. This clause gives potential buyers the security of knowing there is at least one rival bid. To learn more about the process, contact a qualified real estate agent or Canadian mortgage broker.

Click here for the full article from Moneyville.

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