The changing real estate market in Durham Region

The changing real estate market in Durham Region

by | Jan 11, 2023 | Purchasing A Home, Selling

Over the past few months, there has been a significant correction in housing prices in Durham Region. Prices have been changing from month-to-month, and even from week-to-week.

As a buyer, what does this mean to you?

If you are a buyer in this market, it’s possible that there will be a discrepancy between the agreed-upon purchase price and the value of the property on closing. In today’s market, this may be a focal point for your mortgage lender.

If you intend to put down more than 20% towards the purchase of a house, your lender will be less likely to have concern over a discrepancy between the agreed upon purchase price and the actual value of the property on closing.

However, if you intend to make a down payment of between 5-20% towards the purchase price, your lender might be apprehensive about whether the house has gone down in value. In this situation, your lender may be only willing to lend up to 80% of what they perceive to be the true value of the property. If this occurs, you may be left to come up with the shortfall in funds that you were expecting to receive from your lender.

As a seller, what does this mean to you?

Unfortunately for both the buyer and the seller, in a changing market like this, mortgage appraisals can be scheduled uncomfortably close to closing dates. Therefore, a buyer could potentially receive notice only days before closing that the lender’s appraisal is lower than the purchase price. This, in turn, puts the buyer at risk of not being able to complete the transaction as scheduled due to a shortfall of funds.

What happens next?

A good mortgage broker is important throughout the entire real estate transaction process. If, as the buyer, you have the funds to cover the difference that the lender is no longer willing to lend, you are in a manageable situation.

It is not uncommon, however, for people to have insufficient liquid assets to cover a shortfall of this nature. If you don’t personally have the funds, talk to a financing expert – alternative solutions may be available to you.

Should people be scared to buy and sell?

There’s never a perfect market. The more you know about the problems that can potentially arise, the better prepared you will be. At McMurter & Associates, we always recommend having a contingency plan in place given the unpredictability of this ever-changing market.

This article is intended as an informative piece about the subject. It should not be taken as legal advice. We recommend you connect with a real estate lawyer about your specific legal issue.