Overbidding on a house can backfire for the buyer.

We've all seen this before. A buyer is in a competitive situation with multiple bids on a house they overbid to get the property. The problem arrises when the offer to purchase is presented to the lender and the mortgage insurer, either CMHC, Genworth or Canada Guaranty. They review past home sales for the area and say that the house is worth ,say, $40,000 less. This means the buyer has to come up with their 5% down payment AND $40,000 to cover the shortfall. If the deal falls through, the buyer could lose their deposit which in many cases is $5000. This is a bitter lesson to learn. Here's an article on the subject. If you want to protect yourself, contact me for a preapproval. http://business.financialpost.com/2012/04/18/mortgage-wars-backfire/