Humber/Ontario Real Estate Course 2 Exam Practice

Buyer Smith is considering making an offer that exceeds the asking price to outbid other buyers. What is a potential risk?

1. The appraisal may be lower than the offered price, affecting mortgage approval.

2. The seller may think the buyer is too eager and press for more negotiations.

3. The buyer's financing might be triggered earlier than expected.

4. The high offer might attract more competing offers.

5. The buyer may end up with a property that has undisclosed defects.

6. The property may not appreciate as anticipated, leading to a potential loss.

The correct answer is: The appraisal may be lower than the offered price, affecting mortgage approval.

When a buyer chooses to exceed the asking price in order to outbid other buyers, a potential risk is that the appraisal for the property may come in lower than the offered price. This can have a direct impact on the buyer's ability to secure a mortgage at the desired amount, as lenders typically base their decision on the appraised value of the property. If the appraisal is lower than the offered price, the buyer may need to come up with additional funds to cover the difference or risk their mortgage approval being affected due to the discrepancy in the property's value compared to the offered amount. Options B, D, E, and F are not directly related to the specific risk associated with offering a price that exceeds the asking price in a real estate transaction as described in the question. Option C is also not a common risk in this scenario, as the buyer's financing being triggered earlier than expected would typically depend on specific terms agreed upon in the financing agreement rather than the buyer offering a higher price than the asking price.