Erica Shalinsky dutifully places her shoes among a pile at the front door before walking into a three-bedroom duplex unit for sale on the edge of Vancouver’s trendy Mount Pleasant neighbourhood that has attracted dozens of young families in the span of two hours.
If Ms. Shalinsky and her fiancé decide to put in an offer – which they’ve already done, unsuccessfully, for two other properties – they’ll have to do something that would seem unthinkable in almost any other market: make a bid with absolutely zero strings attached.
“My fiancé spent the entire day preparing everything, doing our due diligence on the fly, so we could make a quick decision [to submit an offer with no subjects],” says Ms. Shalinsky, who works in advertising. “Then what happens is there’s always someone that comes out of nowhere [to outbid you].”
Such unconditional offers have become routine in Vancouver’s out-of-control housing market, where a single listing can attract dozens of bids and any condition on a contract, such as the need to secure financing or even have the home inspected, can cause a seller to skip to the next prospective buyer. That forces aspiring homeowners to do their due diligence on the property’s history in a matter of hours – not days – if they want to win an increasingly intense bidding process that experts say could be leaving buyers vulnerable.
It’s also a practice the province’s real estate regulator has warned about as recently as last summer.
There is no way to know how common such offers are, since no agency tracks the phenomenon, but a handful of Vancouver-area real estate agents have told The Globe and Mail such agreements have become routine in the region in the past two years.
While sales in Metro Vancouver have surged in the past year, listings have fallen. There were 6,635 residential properties of all types listed last month, which was down 38.6 per cent from the same time last year, according to the Real Estate Board of Greater Vancouver.
In a bulletin last August, the Real Estate Council of B.C., the self-governing body that oversees agents and brokerage firms, issued a warning to licensees asked to write unconditional offers.
“Advise your clients that writing an offer with no subject clauses could expose them to many potential risks,” the bulletin states. “Ensure they understand that in moving forward without subject conditions they are accepting those risks.”
Tom Davidoff, a real estate economist at the University of B.C.’s Sauder School of Business, said buyers should complete an inspection and secure financing from a bank before tendering a bid in what is “very much a seller’s market.”
“The question is: do you spend $500 on a home inspection? It’s not clear you should before you bid because the probability of being the winning bidder is pretty low” Prof. Davidoff said.
Still, he said a preoffer home inspection is the necessary tradeoff to make a winning bid that contains no clauses as “you could be out 20, 50 grand for something you didn’t know [about] that an engineer found.”
Those buying strata properties must also spend hours in the tense lead-up to an offer poring over strata council documents to ensure against any other problems with the unit, he said.
When they made their last bid, Ms. Shalinksy said she and her fiancé went to an open house on the weekend and submitted their offer – without any subjects – by Monday evening. In between, they had to organize chaotic visits by family members and tour the home with friends capable of inspecting it properly for flaws, as well as getting a preapproved mortgage from the bank.
In the end, none of that mattered, as they were outbid by another party.
Ron Basra, Ms. Shalinsky’s agent who specializes in the neighbourhood, said the clear lack of inventory in Vancouver is a “major issue” for growing young families locked out of the city’s exorbitant west side, where last month’s median sold price for detached houses reached $3.5-million.
“The problem is we can’t go south because of the U.S., we can’t go west because of water, we can’t go north because of the mountains,” Mr. Basra said of the region. “We can only go east and we can go high density.”
He said he has had clients take up to two years to buy a property in the Kensington/Cedar Cottage neighbourhood.
Ms. Shalinsky says she remains hopeful she can start a family in Vancouver in a home she owns, citing their plan to pool resources and buy a place with her future brother-in-law as an edge over other buyers.
“My biggest concern is I work very hard to be here and I know how hard it is. I’m worried all my friends are going to leave.”