So, you sold your house? What comes next isn't always smooth sailing
From sales falling through to struggling to find your next home — here's what some sellers are facing
Michael Margaritis just sold his 1.8-hectare property in Oldcastle just south of Windsor, Ont., for $1.35 million.
Suddenly, he and his family were in a race against time to purchase a new home.
"I was a rich man without a house," said Margaritis.
He went from being a seller cashing in on a hot market to a buyer trying to get a home in the same environment, a tough transition that's catching sellers by surprise.
Margaritis put offers in on four or five homes with no success — and was resistant to get into bidding wars, which he says are unfairly driving up the prices of homes.
"It's unethical, or dirty," he said, adding he was told, 'If you don't go up [in an offer], you will never get a house.' We had to get a house because we have to get out of here."
Eventually, he and his wife bid $804,000 on a Windsor house listed at $700,000. The day the offers were being considered, he said, his real estate agent told him to go up to $850,000 to seal the deal. Margaritis resisted, but finally settled on $825,000 and the house was theirs — though Margaritis insists the house isn't worth what he paid.
"I was a poor man when I came to this country, and I don't like to throw money away, especially thousands, hundreds of thousands."
He said he bought that particular home because it was large enough to house his daughters and their spouses — he worries they'll never be able to buy homes on their own, given the market.
What followed was another roadblock. He gets possession of the new home May 13, while his current home's closing is the end of June, meaning he needed a bridge mortgage to help cover the costs in the interim.
Given both he and his wife are pensioners, together making around $75,000, it was a difficult process.
"With that money, the bank cannot even look at you," he said, despite the fact he had a number of other assets.
Though he finally secured a short-term mortgage to cover the period between closing dates, it was a stressful experience that left them feeling stranded
According to Damon Winney, president of the Windsor-Essex County Association of Realtors, some of this stress could have been alleviated had the current home been sold after the new home had been purchased, to ensure the closing dates were in sync.
Some sell, then get stuck renting
Mortgage broker Rasha Ingratta says that in the past, the advice was always to sell first. But that's flipped in today's climate.
"Make sure you purchase a home before you sell your home because what we're finding is a lot of people are selling their homes — but [don't] have homes to go to," Ingratta said.
There are more sales falling through than ever before.- Rasha Ingratta, mortgage broker
She said a number of her clients sold their homes first, but unable to purchase what they wanted with that cash, are now renting.
Transition from seller to buyer
Margaritis is dumbfounded by the state of the market.
"It's easy to sell," he said.
"But when you buy, you'll find out that the money you got probably won't be enough."
He's frustrated so many homes are listed well below market value to attract more attention, suggesting it's to "fool" people.
But Winney said that ultimately, real estate agents serve their clients by offering advice, never forcing their hands.
"We cannot force them to do anything. We can simply provide guidance for them. If the seller and/or the buyer wishes to take our advice, it's given in the best interest of them, the client."
Winney also acknowledged the tough transition from seller to buyer.
"Their euphoric high that they've just had when they've just cashed out on the sale of their home, that's a marvellous time," he said.
"But it is the realization shortly thereafter that now you're in the mix with everybody else. But the thing they've got in their back pocket that a lot of people don't have is knowing that they've got a lot of equity position sitting in the sale of their home."
According to Ingratta, another growing issue is not all sales work out.
"There are more sales falling through than ever before."
Money falls through
Winney said it's rare for sales to fall through, but it does happen.
"When you put your heart and your energy into buying and sale of a home, because it's a very emotional process, when it happens, it's absolutely devastating for the parties involved," Winney said.
Financing is one of the key reasons a sale might not proceed.
A buyer might be financed for a certain amount, so places a bid within that price range. If that offer is accepted at $500,000, for example, but following an appraisal the bank decides the house is only worth $450,000, you won't get the full financing required, leaving the purchaser having to make up the difference.
"And that's difficult sometimes when that's, say, $50,000," said Ingratta.
She said it's challenging to encourage clients to put any kind of financing condition on their offers, because that usually means killing any chance of getting the home.
It's a risk not only for the buyer, but for the seller, too. It forces them to consider whether to accept an offer that's well above the estimated market value, at the risk of it hinging on a mortgage approval that could go awry.
What happens when a sale goes bad?
In cases where financing falls through and the purchaser backs out, the seller gets to keep the deposit and could choose to sue for damages.
According to Ingratta, though, normally the house would be put back on the market, and, in this climate, would likely sell for that same price or higher.
She said some mortgage brokers have access to their own systems to help them do a "desktop appraisal," to see if putting an offer on a house is worth it by helping determine whether it'll be appraised at the offer price. Ingratta advises her clients to do this before making a bid — especially in a market where houses are sometimes selling tens of thousands of dollars over asking price.