“The deal is dead.” They just hung there. The four words you never really want to hear in real estate. Almost like “I’m breaking up with you.” Words like these can make you feel a little sick to your stomach – sometimes a lot sick to your stomach – but that’s not the way Rhonda the Realtor felt, at least not this time. Yes, she was disappointed for her clients, Carmen and Cameron, but she felt they could find a home that would be better suited to their needs than this one.

Many people think that Realtors just want to sell homes – any homes to any people at any prices. That simply isn’t true. Most of us care deeply about our clients and want them to buy the right homes, the homes that will make them happy for years to come. For every home one of my clients buys, there are probably five to ten homes I have to talk them out of buying because they aren’t the right homes for them. Example: my very first clients are still living in the home they bought in 1992. If only I could be paid for talking people out of homes instead of selling them homes.

Carmen and Cameron were in the process of looking for a new home when they came across one that caught their eye. When they asked Rhonda for her opinion she told them the location wasn’t great, it appeared to be overpriced and they could do better. Carmen and Cameron said “We trust your opinion, but would it be alright if go to see it anyway?” Rhonda took them to see it and they were smitten.

Rhonda had been through this before. She knew her clients could find another home that would be better suited to their needs, but her clients had fallen in love with this home. They didn’t care about the location or the price. They were in love and this was the home they wanted.

Rhonda tried to convince them otherwise, but they insisted on making an offer. The home was listed at $2,450,000. Carmen and Cameron wanted to make an opening offer of $2,350,000. “No, no, no” said Rhonda, “That’s too high. Remember what I told you about the list price being on the high side? How about we start at $2,150,000?” Negotiations ensued over the next few days, but the sellers weren’t prepared to accept much less than their list price. Eventually, their emotional attachment to the home got the better of them and Carmen and Cameron agreed to the sellers’ price.

Their offer was conditional on financing and home inspection. They did their home inspection and all went well. There were no issues with the home. But financing was another story.

As is normal, their bank requisitioned an appraisal of the property. What wasn’t normal was that the appraised value of the property came in at 10% below the sale price. Appraised values are usually at or above sale prices these days. The low value meant the bank wouldn’t lend Carmen and Cameron the money they needed to buy the home. While this doesn’t happen all that often in this market, it isn’t completely unheard of. Carmen and Cameron called their bank and said “That appraisal can’t be right. The appraiser must’ve made a mistake. Please send another appraiser.” They were smart. This was the right thing to do in the circumstances. But guess what the second appraiser came up with? You got it – 10% below the sale price. Carmen and Cameron were disappointed about having to terminate the deal, but they were happy Rhonda had included a financing condition in their offer so they wouldn’t lose their deposit and or suffer any adverse legal consequences. They were also confident Rhonda would find them another home with which they’d fall in love.

So what can you learn from this:

• If your Realtor advises you not to buy a home, it’s probably a good idea to listen to that advice.
• Unless you have sufficient cash to buy a home without a loan, don’t assume you can pay as much as you want. Your bank will still want to ensure you didn’t overpay and there’s enough value in the home to support your loan.
• Make sure there are comparable sales that support your purchase price for the appraiser to rely on so the appraised value of the home you buy will correspond to the price you pay and the bank will be willing to loan you the money to complete your transaction.
• If the home you like is unique and there are no comparable sales or if you’re unsure about your financing, make your offer conditional on financing. Yes, this may mean missing out on a particular home, but homes are like buses – don’t fret if you miss one because another one will come along soon.

Things can be complicated in today’s fast moving market. If you know how the market works and have a good Realtor like Rhonda to help you, your chances of being successful increase exponentially.

Now, if you know anyone who’s interested in learning how the market works and who’d like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family, please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And as always, don’t be shy if you have any questions or comments about this post! Thanks for reading.