As Canadian home prices are lowering, homebuyers are witnessing the appraisal gap to be growing, and people are trying their best to come up with solutions to narrow the gap. When an appraisal price comes lower than the purchase offer, the homebuyer will have to come up with the remaining amount which leaves them scrambling. Data from the Canadian Real Estate Association (CREA) has revealed that the average home prices at the national level have been declining since the past few months. But then there are regional factors that need to be looked at too. House prices have been falling in cities near Toronto. People who want bigger spaces are seen leaving Toronto and shifting to suburbs due to which the prices in smaller cities have been rising. But these are now falling again. How to lower appraisal values? There are various factors at play while calculating the home value. A common factor is the price of similar homes. The other factors that come into play are the size of the house, its cost, and its other features including the earlier selling price. All of these are affected in one way or the other which is not in the buyer's hands such as the pandemic-led move from urban areas to small towns. The high interest rate levied by the Bank of Canada is also one such factor which has carrying costs on a monthly basis for the variable-rate mortgages. An appraisal which is lower than expected can be bad news financially for you. You then are faced with two choices: to pull out from the deal or come up with cash. During the pandemic there was a great rush to buy homes and some homebuyers made unconditional purchase offers which translated to either paying the full amount or ending up in default. Hence conditional financing helps because of the unforeseen nature of life. Renegotiation could be an option in case some buyers want to close the deal and are willing to lower the price. If a homebuyer has made an offer of unconditional purchase, then to walk away from the deal means violating the law for which you may be in court for a couple of eyars and even have to pay a large sum towards legal fees. But it is unfair for brokers to wait for long periods of time to ask for an appraisal given the current situation of the housing market. When the prices drop appraisals must happen soon. If you are looking to fix the appraisal gaps and are stuck or need help, do not hesitate to reach out to us at LendX Financial in Brampton, Greater Toronto Area.
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