Now that we have new mortgage rules, it is more important than ever before to include the financing condition in any offer or be otherwise prepared for the consequences.
Pre-approvals are no guarantee your buyer will obtain financing.
Too many buyers are cavalier about submitting offers without a financing condition, especially during the pressure of a bidding war. They must understand that even with a pre-approval, the lender must be satisfied with its own appraisal. The foundation for most appraisals is, what would a willing buyer pay a willing seller, WITHOUT pressure?
In a bidding war, there is almost always pressure on the buyer.
This is why the appraisal will likely be lower than what the buyer offered and the lender will offer your buyer less money than they hoped for. The answer is always to have an extra five to 10 per cent of the down payment in reserve to protect themselves. In a condominium purchase, if it is conditional upon review of a status certificate, use that time to also make sure their financing is in order.