Woman stuck renting despite $450K home preapproval
The competition in the Canadian real estate market is stiffening. According to a former homeowner in Windsor, Ontario, blind bidding wars have spiraled out of control.
In 2020, Cristina Conciatori was outbid in the market and was left with no other choice than to rent an apartment, despite having a great credit score and a $450,000 mortgage pre-approval. She had sold her home for a price she had assumed was more than enough to cover the purchase of another house, especially since she had already saved the recommended 20 percent down payment of about $90,000.
However, during her search for a new home with four bedrooms to accommodate herself and her three children, she hit a brick wall. The intense blind bidding war made it impossible for her to afford any property listed below $450,000 since most of the houses that fit her requirements were being sold at a much higher price.
Conciatori sold her home in October of last year for $460,000, with some of that money going to mortgage penalties. Unfortunately, she had no idea just how erratic the housing market in Canada had become prior to making the sale.
“I didn’t want to end up buying a house and not be able to sell mine, not realizing that it’s a seller’s market and I could’ve easily sold my home. I just didn’t realize it at the time,” said Conciatori in a CBC report.
Over the next five months, Conciatori searched hard for a new place for her and her family to live. Unfortunately, all of the houses she was interested in were now priced out of her budget, despite being considerably cheaper only a few short months ago. She added that listing prices have lost their value and currently, are meaningless to homebuyers.
But what about the houses that actually had list prices within Conciatori’s budget? They all sold for much higher than their asking prices, making it near impossible for her to purchase a new home. Conciatori went from being a property owner to being forced to rent an apartment, something she said has been quite unsettling.
A house is one of the most expensive purchases any Canadian will make. With a Canadian mortgage calculator you can check your eligibility before applying for a mortgage. However, obtaining a pre-approval is equally important in gaining a competitive edge in the market. Conciatori had a job with a great income, enough money to make a decent down payment as well as a mortgage pre-approval, and yet was still unable to find a suitable home.
“One of the challenges of being a single-income earner is that it limits your buying potential in the housing market”, said Conciatori. About ten years ago, before her divorce, housing prices were quite affordable – she found a beautiful five-bedroom home in LaSalle which she purchased for $247,000.
Today, according to Conciatori, that same property is worth about $600,000. She regrets selling her home but acknowledges that it is already too late and needs to simply count her losses and move on.
In Windsor, the average price of a property has increased by almost 60 percent in 2020. According to a new report, it climbed from $356,444 in April of last year to $571,943 only twelve months later. The whopping increase can be attributed in part to the rise in blind bidding wars, which has become a major problem for homebuyers across the country.
Murtaza Haider, a professor of real estate management at Ryerson University in Toronto, said that the current bidding situation has resulted in shrinkage of home affordability across Canada.
“The bidding wars are a big challenge in a way that they are legal, where a seller and the seller’s agent underprice a property and list it below the market value to attract people,” said Haider.
A blind bid is when a prospective buyer places a bid without knowing what other potential buyers are offering for the same property. “The main problem with this approach is that it lacks transparency, and the final offer may be a lot more expensive than it should be”, said Haider.
Being forced to pay hundreds and even thousands of dollars more simply to outbid every other potential buyer is bad for both the winning bidder and the entire bidding system since property prices only get inflated. Haider added that this blind bidding system makes it more difficult for families to purchase the home they really want as they are constantly outbid in the market.
Now, Conciatori is left with no choice but to wait for her children to move out before she can afford to buy something smaller in the future. However, the experience of searching for a new home has left her feeling very unhappy and uncertain about the future.