While it’s great for the real estate market to be bustling, what we witnessed just a little over a year ago took the definition of a hot market to new extremes: offers were being submitted in droves, homes were selling in 24 hours or less, out-of-town buyers were purchasing homes sight unseen, and offers with standard conditions (previously the norm) were thrown at the bottom of the pile and not even being considered.  

At the height of it all, the sentiment was very much “what a great time to be a home seller, but what an unfortunate time to be a homebuyer!” Sure, home sellers could sell their homes extremely quickly and for top dollar, but the overheated market of 2021 into the beginning of 2022 also brought about challenges, risks, and unforeseen problems. 

A deal with the no conditions devil 

As a seller, why wouldn’t you accept a “clean” offer with no conditions? While at first extremely attractive, many of these no conditions deals gave way to more fall-throughs than ever before. More specifically, buyers whose homes were purchased at the tail end of the madness and closed when the market cooled were often faced with home appraisals that fell short of the purchase price, and they were then forced to renege on their deals. As Storeys reiterates, “When a lender’s valuation comes in lower than the sale price, the borrower is responsible for paying the difference between the valuation and the sale price upfront — an option only accessible to those who have the cash on hand to do so." Since buyers had waved finance conditions, if they ended up not obtaining the lending for the home they purchased, they had no protection but remained legally bound to uphold the agreement.  

Home sellers who found themselves on the other side of these deals were forced to put their homes back on the market. Oftentimes, they had purchased or were looking to purchase another home based on the sale price of their initial deal. After putting their home back on the market, they often accepted offers lower than their original deal and because of this, sought legal recourse from the original home buyers to cover the difference in purchase price. Home selling can already be a stressful process without the added difficulties of a deal falling through and a potential litigation!  

Messy and chaotic situations like the one described above, while previously few and far between, became pretty commonplace. A year or two later, many deals that had fallen through are still pending based on the outcome of the litigations. 

Speaking of litigation... 

Financing was not the only condition to be waived during the mad market! Inspection and walkthrough conditions were also not being included in favour of “cleaner” offers. The result has been an uptick in litigations from buyers who purchased homes with at times serious and costly problems.   

According to an Ottawa litigation lawyer, there has been a “significant increase in the number of clients who purchased a home with no conditions and are now seeking legal recourse for problems that popped up after moving in.”  

Conforming to Ontario law, home sellers must disclose any known latent defects, meaning ones that are not necessarily visible to the eye (like mould, foundation issues, etc). If they do not, they could face legal recourse from the buyers.  

While these kinds of cases can be hard to prove and hard to win especially with no conditions in the original deal, disgruntled homebuyers who spent all of their life savings on their new home during the peak of the market may be more willing to pursue a case that will give them the money they need to fix whatever grave issues they are dealing with.  

Nowhere to go 

Ok so you’re a home seller that just sold their house for more than you ever thought possible! In a normal, more balanced market that would be great news. But what happens when you sell your home and then are looking to buy a new home in this same, severely skewed seller’s market? What happens when you find yourself on the other side of the pendulum, being one of twenty clean offers but unable to outbid the others? 

Some home sellers found themselves in this exact predicament: eager to sell their homes but unable to secure a new home without grossly overbidding. While at first the prospect of getting top dollar for their home was tempting, the reality they faced on the buying side was abysmal. Those who had the option turned to renting or living with family until the market cooled, while those who did not may have had to purchase homes that did not necessarily fulfill their needs and at the highest price point possible.  

Where we are today

Time and time again, we’ve heard sellers in the current housing market sigh with great regret at not having listed their house a year or two ago when they could have gotten the best possible monetary outcome. However, we think it’s important to remember to take the good with the bad: a year ago there were unprecedented financial gains and quick closings yes, but with that came mess, stress, litigations, and uncertainty unlike any other.  

We firmly believe that there is a lot to love about the current market! Home prices are still up 83% compared to 2018, so home sellers are making an incredible return on their investment without all the frenzy, panic, and risk of litigation! 

Luckily, we have a ton of London, Ontario real estate professionals to choose from that can assist you in all your home selling needs.