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Upon referring a persuasive book to a good friend of mine, she admitted that she could be easily convinced of a wide range of ideas from any well-written book, whether it was “right” or not. This was a moment of honesty very few people can even admit to themselves, much less to others. Sometimes we agree with something we have read because we want to agree with it, or maybe it just “feels” right, or maybe it is actually true. The fact is, none of us have the tools to be experts in everything, but the problem is that we almost need to be experts in which “experts” we can trust. My first rule is if someone calls him or her self an “expert”, he or she usually isn’t.

 

Real estate speculation almost seems like Vancouver’s official sport. Everyone has an opinion and everyone seems to be an expert. It is safe to say that even in the last few years of troubling economic times, Vancouver has been the hottest market in Canada, and probably in the top 10 in North America. At times it can seem insane. Maybe it is. But this market has led to two speculating camps, both using what I call “funny math” to prove their point.

 

Don’t get me wrong, they are both convincing. Problem is, they are so convinced that they are right, that they ignore everything the other side says, when the truth likely lies somewhere in the middle (or is utterly unforeseeable either way). The two camps I speak of, in regards to real estate speculation, are the utopians and the doomsayers. Utopians believe that the market will forever keep rising and rising – there may be small corrections along the way, but Canada will always be safe and steady for real estate investment. Doomsayers, on the other hand, are always calling for the biggest collapse in real estate history – unaffordability cannot be sustained and the market is sure to dive at any moment.

 

Unfortunately, as real estate professionals, we sometimes get caught up in the speculation. It sometimes seems natural that we should should give our opinion on the future of the marketplace. But we shouldn’t. While we are professionals, we are also salespeople held to a code that we must put our client’s interest before even our own. It is almost entirely against our benefit to forecast a poor market. So when was the last time you heard a real estate agent say that he or she believed a downturn was coming? Utopians will usually quote population projections and livability quotients.

 

On the other hand, doomsayers generally advocate that their followers should rent until judgment day, when all the greater fools will get what is coming to them and those who waited can pick up the pieces of a crashed market (like many Canadians did on American soil). Doomsayers quote household and government debt numbers, unaffordability ratios and rising mortgage rates.

 

Unfortunately for both camps, they let their passion blind them and ignore the balance of the two. What ends up happening is that the general public doesn’t know who to trust. You can’t ignore the numbers of either. This isn’t a zero-sum game. You can’t tell people for 10 years that the market is going to collapse any day and expect credibility to last forever. You also can’t paint rosy pictures when history has continually shown the reality of real estate cycles, and the subtle or not-so-subltle warning signs for market corrections.

 

So do your own research and follow the money. You want to invest in real estate? Talk to a real estate investor who actually makes money buying and selling real estate. Not an author. Not someone who lives in New York or someone who wants to sell you something (like a book or membership to some exclusive club). Talk to someone you know has seen the market rise and fall. Want to buy a home? Understand that if you sell in the peak of the market, you will probably buy in one too. Same with a slow market. Don’t play the game. Buy and sell what you need. Get a good deal and let your REALTOR® do what they do best – sell your home for the best possible price and find you a home that matches your needs. They can inform you honestly about the past market and the current market – but REALTORS® are not soothsayers.

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Many home buyers understand the concept of a “back-up offer” – a seller accepts a preferred offer in a multiple offer situation, but wants the option to have a back-up offer in case subjects are not removed on the accepted contract. But many home buyers don’t realize that you can actually write up an offer even after there has been an accepted offer on a property.

 

However, both buyers and sellers need to know a few things before entering into a back-up offer situation.

 

First, for sellers, you must make sure that your real estate agent, upon accepted a back-up offer, writes a back-up clause into the secondary offer, preventing you, the seller, from being legally bound to selling one property to two different buyers (awkward…). Make sure that your contract is rock solid – that is, one contract at a time.

 

An accepted offer is a legally binding contract. But for those of you who have bought a home know, a change to that Contract of Purchase and Sale usually constitutes a rejection of the previous contract (this is how the offer-counteroffer process works). If you have an accepted offer with a backup offer and you re-open negotiations, you could actually be rejecting your initial contract and therefore legally activating the backup offer. So always get legal advice from a lawyer well-versed in real estate transactions if this is the situation you may be finding yourself in.

 

For buyers, the backup offer may be a great idea in case subjects are not removed on that home you were just too late to get in. Deals fall apart all the time. However, what if you write up that backup offer and then find something else that you like? Well, just like any other offer, it can revoked prior to acceptance (we’ll leave the complications of revocation for another post). However, just make sure that this possibility is addressed in the backup offer in case of acceptance. Have your agent write in the proper clauses so that you are able to collapse the accepted offer in case that “other dream home” pops up. Just remember, certain clauses signal to the seller’s agent that your offer is leaving too many “outs”, which may weaken your negotiating position. Sellers want to see serious contracts with buyers that have the full intent to purchase.

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