What You Can Expect If You Bought a Home Before Coronavirus
Did you buy a home before Coronavirus led to Canada being in lockdown? You may be wondering how this will affect you if closing date if it’s at some point in the future. Point2 Homes wrote an interesting article on this very topic.
At the start of 2020, it seemed like the Canadian real estate market was heading for another record-breaking year. In February for instance, home sales were up by nearly 27% compared to last year; meanwhile home prices were up 15%. However, as Coronavirus has become a more serious issue in March, the real estate market is now facing with a new challenge.
Just like any other home buying season, thousands of Canadians bought homes before Coronavirus became a big deal. According to data from the Canadian Real Estate Association (CREA), 130,000 families may be waiting to see if their deal closes. Some may be wondering if they can get out of their current deal if they lost their job due to Covid-19.
Typically, it takes a few weeks or months for a deal to close. When an offer is accepted, the buyer usually transfers a deposit to be held in trust to the seller’s lawyer with the rest of the down payment being transferred at closing. Considering the process can be stretched out over several months, things could certainly change before closing. With home prices dropping before closing, some homebuyers may have buyer’s remorse.
For homebuyers who still want to move forward with their deals, other issues may come up. For example, a decline in home prices could mean the home comes in lower on the appraisal than anticipated. This means you may have to come up with a larger down payment.
One things that can cause issues through no fault of the buyer’s is if the buyer loses their job. If the buyer loses their job, the buyer may not be able to get a mortgage.
Although mortgage lenders are looking at situations like this on a case by case basis, there are instances where a homebuyer simply can’t secure mortgage financing on time. If that’s the case, the buyer can ask for an extension, but that puts the seller in a difficult position.
If the seller has also bought a property that’s closing within a certain time frame, the seller may have to adjust their closing date or get bridge financing, costing them more money.
In case you’re wondering, homebuyers can’t simply walk away from the deal. Not only would a homebuyer likely lose their deposit, the buyer could be sued by the seller for breach of contract. The seller could also sue the buyer if they end up selling their home for less to another buyer.
Brought to you bySean Cooper