There is a lot of success in real estate. Most real estate deals get done. Most houses sell, most of the time. Most buyers find what they are looking for. As Realtors we tend to be very positive and optimistic. Statistics are on our side. There are certainly more successes than failures.
Some houses don’t sell though. And some buyers never find what they are looking for. And some deals fall apart somewhere between the offer and the closing date. The deals that fall apart often do so in the first week or so. At least it is not a long and drawn out process like it is in the states, where as I understand it, you’re never too sure if your house is going to stay sold or if the house you just bought is going to still be yours, until you get the keys on closing day.
In our current market, some offers never get very far. They are either knocked out by competing offers or not made at all, as the best houses are often listed and sold sometimes in hours, often in a couple of days. With offers, you have to be fast and informed and confident enough to strike with absolute clarity.
A client of mine had the disappointing experience of having his buyer not close on the purchase of his house. Here’s what happened:
A builder approached my client with an offer to purchase his house. He also approached two of the abutting neighbours. All three agreed to the builder’s very generous offers. The agreements were approved by lawyers. It was all good and legal. Everyone was happy.
Here’s where I come in.
My clients invited me to help them find a new place to live. We had lots of time and in no time we found the perfect house. We offered, negotiated and purchased it. We went though the conditions, had an inspection done and signed off, firmed up. The home was going to be purchased with the proceeds of the sale of their builder bought, not yet closed home.
Then this happened:
The builder did not close on the neighbour’s house. The neighbour’s house was set to close a month earlier than my client’s. The builder was in breach of contract and subsequently reneged on my client’s deal too. We asked the lawyer what to do and the advice was to wait until the builder breached his contract and then get the house on the market and sold as quickly as possible. We had a month to plan and worry and fret. My client still had to close on his purchase and get a short term equity loan to cover the purchase amount until he could get the mortgage free cash out of his old home. It was a fiasco and it cost a bit of money, a few sleepless night and generated some choice words and new learnings.
“Can we sue the builder? Can we sue him for hardship caused? Can we sue him for the the added costs and the difference between what he reneged for and what we sold it for?”
“You could”, said the lawyer, “and you would win, But you would never collect a red cent.”
The two most common conditions are mortgage financing and home inspection. If you are purchasing a condo, the status certificate clause will be included. The sale of buyer’s property clause sometimes comes up.
Most home buyers get pre-approved as they begin their home search. How else would you know how much you can afford except by talking with your lender, right? Of course, things change. Maybe between the time you get pre-approved and the time you buy, you make some large purchases. Maybe you buy a car. Or maybe you quit your job and become self employed. These sorts of things will change your qualifications for a mortgage.
The most common way for real estate deals to go south is after home inspections. In my real estate career, I’ve seen deals die because of issues with mould, cracked foundations, leaky roofs, and knob-and-tube wiring…
Sometimes your lawyer’s review of the condo status certificate will uncover a pending special assessment or a reserve fund that is inadequate to deal with the upcoming years’ expenses.
Sale of buyer’s property
If one of the conditions of buying is that the buyer must sell his current property then we all have to wait for that to happen. And, whether or not that happens is mostly out of our control.
Here’s what the mortgage finance condition looks like. The other clauses are much similar but cover home inspection, condo status certificate approval, the sale of buyer’s property, or whatever other condition your realtor and you decide to include:
This Offer is conditional upon the Buyer arranging, at the Buyer’s own expense, a new first Charge/Mortgage satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 8pm five business days after acceptance, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.
1) The conditions are written for the benefit of the buyer.
2) Unless the buyer gives notice in writing to the seller that this condition is fulfilled, the offer becomes null and void.