On today’s show I’m talking about a property that I placed an offer on, and ultimately lost. The West end of Ottawa Canada has extremely low inventory. Some realtors estimate that there are 75 potential buyers for every one seller. Inventory is less than 10 days.
In fact, in my suburb of the city which represents a population of 90,000 people, there are only 16 homes listed for sale, 14 of them are South of a major freeway and in a less desirable area, and only two of them are North of the Freeway and one of those is already conditionally sold.
So to say that there is zero inventory in our market is not much of an exaggeration.
The home I placed the offer on was about 21 years old. The builder had acceptable build quality, and I know the builder first hand having purchased another home from them several years ago.
The owner of the home was the third owner in 21 years, and none of the owners had made any upgrades to the property to speak of. There was no backsplash in the kitchen, the appliances were new. The furnace was original. The windows needed replacing. There were many signs of deferred maintenance. The furnace was sitting in a puddle of water and there was a dehumidifier set up next to the furnace.
Needless to say, there was a lengthy list of items to investigate.
As is often the case in a sellers market like this, the agent for the seller set up the sale process as an auction. Offers would be accepted up until 3PM the day after the showing and I submitted my offer on time.
Our offer was a cash offer and had only a 10 day contingency for inspection. Given the scope of problems we saw in our short initial visit to the property, an inspection by a professional inspector was clearly warranted.
An hour later, the agent came back and said there were multiple offers. Did we want to amend our offer?
In response, I increased the offer price by $10,000 and reduced the inspection contingency period by 5 days.
The agent came back an hour later and asked if we could come up another $5,000 which we did.
Then by dinner time, the listing agent came back and informed me that we did not win the bidding war. The seller was not comfortable with the inspection condition.
They went with another offer at a lower price with no conditions.
So here’s the interesting situation. The buyer took the risk of a significant amount of deferred maintenance. I saw about $30,000 of work with the naked eye in less than 15 minutes on the property at night time. I probably would have seen more with a proper daytime inspection, and still more with a professional building inspection.
I think the buyer was silly to take the risk on that much deferred maintenance. I’m not scared of repairs and upgrades. In fact, I was glad that the seller didn’t try to do a poor quality renovation. A poor quality remodel would have made the home even more difficult to purchase.
One agent told me that in the current market, placing a condition of any kind on an offer means losing the auction.
I don’t regret losing the auction. I don’t like auctions, and I don’t like the artificial scarcity that an auction represents. Auction fever is real, and when it takes hold, paying too much is almost always the result.
I’m not an anxious buyer. I’m never an anxious buyer.
It’s far more important to me to purchase a property using the right process and not cut corners. Just because other people are willing to be desperate, doesn’t mean I need to be desperate.
Decisions made out of haste or desperation are rarely the best decisions in life.
