DISCLAIMER: This blog contains my own personal thoughts about our current market and some steps to take when a Real Estate sale is showing signs of not closing. I am not a Lawyer, nor do I pretend to be an expert in the law. If your sale is in peril, seek professional guidance from your Realtor and Lawyer immediately.
What a crazy market this has become. Since my last blog about the Roller Coaster year to date, some very interesting new developments have dramatically changed the landscape of GTA Real Estate sales.
· Last week, I received an email from a Realtor whose client purchased one of our listings. The buyer is unable to sell their home and needs an extension.
· Yesterday, I received an email from a different Realtor, advising the market had shifted and the purchaser wanted a price reduction.
These two sales in my own business are a microcosm of what is happening across most of the GTA at this time. The traditional thinking for many years has been that you must buy a new home before listing your own home. With inventory levels tight - and finding and securing the perfect ‘next’ home being a considerable challenge - this was the only way to engage in the process of buying and selling a home. As we entered 2017, that traditional thinking remained status quo.
‘Sell first’ becomes the new mantra
Being blessed with a large listing inventory in our business, the shift in buyer trends was evident to our team pretty quickly. By late March to mid-April, it became clear that selling was going to be the bigger Challenge. We advised all of our purchasing clients who had a house to sell that we had to stop looking at homes and get theirs on the market first. There was too much inventory, too many factors contributing to the ‘perfect storm’ in a shift, and dramatically lower numbers of motivated buyers.
However, if a Realtor had little or no listing inventory, the changing buyer trends would have been missed. As a result, in many cases, people were buying first and then listing their home. This is not a criticism of other Realtor’s professionalism or skill in not spotting the trend. A shift in the market is slowly, slowly, suddenly; and the ‘suddenly’ was now upon us.
My closing is in 3 weeks… and I still can’t sell my current house!
Fast forward to today! Many consumers find themselves in a place of extreme peril. They bought fully expecting their own house would sell quickly and for just as much as the house down the street. Weeks later, they are still on the market, showings are almost non-existent and the stress is taking its toll. They have dropped their price to the bare minimum – still no showings; still no offers. This is where it is critical to reach out to the other side of the transaction quickly and work toward a compromise of some sort. Delay the closing if possible; come to acceptable terms that both parties can agree to. There are many people who are victims of extremely unfortunate market circumstances right now and finding the win-win is in everyone’s best interest. If a mortgage or finance is involved, begin the discussions with your lender as soon as possible to explore and fully understand all your options.
(Realtors, now more than ever, this is where the name ‘Co-Operating Broker’ comes into our day-to-day lives. No one is right and no one is wrong. These are people and families going through one of the most stressful times of their lives. We need to be professional with each other and assist to the best of our ability. Our clients need our knowledge and our creative skills now more than ever. That said, don’t be the hero and try and tackle this alone. Engage your Broker of Record and your client’s lawyer immediately.)
The Buyer just told me they need to delay the closing. Why is that my problem?
For home sellers, the completion of the sale is the pivotal next step to achieving your goals. Taking a hard stance right now may not be in your best interest. If you can delay the close, consider this as a serious option. Work through an Amendment with the Purchaser that increases the deposit, potentially increases the purchase price to offset any out of pocket losses you may incur, and ensure there is new language in the Agreement with respect to the deposit in the event the sale cannot ultimately close. Getting the deposit at Breach of Contract by the Purchaser is not that simple. Look at one of my older blogs about the Real Estate deposit.
Access to these funds is complicated and you must be made aware of the challenges ahead of you. Your lawyer may likely say the deposit is yours. Not so quickly! The Real Estate and Business Brokers Act has very strict regulatory legislation in place with respect to that money. Hence, look carefully at your long term goals and recognize that you could be looking at months - to years -of litigation to get the deposit and damages awarded to you. Perhaps a compromise position now to ensure a successful close is not such a bad idea. Everyone’s circumstances are unique. I am not counselling anyone on what their course of action should be. Simply to suggest that a calm and compassionate stance is your best response.
The Buyer has told me they will not close… what the _ _ _ _!
(Insert four letter word of your choice)
Now this is a horse of a different colour! In some extreme cases right now, we are seeing buyers outright state that they will not close. Clearly, neither a home seller nor their Realtor can take rash actions due to anticipatory Breach of Contract. However, know your options and act prudently. (Realtors, engage your Broker of Record and your client’s lawyer immediately.)
Understand your next steps carefully with your lawyer. There is little that can be done until such time as the actual closing day comes and goes, and the Purchaser is officially in Breach of Contract. I would certainly advise a letter from your lawyer back to the other side of the sale. If they have fired a warning across your bow, it is critical a warning be fired back so respective positions are known right away. Then, unfortunately, you wait.
During this waiting period, re-evaluate your goals and know all our options. In order to fully determine damages, re-listing the home for sale and completing the new sale is likely the best determinant of final damages to you. If you re-sell the house for more or if you re-sell the house for less will be determined by the market at that time and only then can damages be determined and litigation would commence. Know that you could be in this for a very, very long time. And the ruling of the court may not necessarily be entirely in your favour. Much to consider when deciding that litigation is your course of action.
Remember, that original deposit money is still in a Real Estate Trust account. You cannot necessarily factor this money into how you pursue damages from the Purchaser. (Unless of course, you litigate against the Listing Brokerage and the court orders the release of the deposit to you. Just know, by the way, that we do not want this money. We want you to have it as soon as possible. Unfortunately, it is the law and the funds can only be released in accordance with the law – default again to my Deposit Blog!)
Having a Professional Realtor on your side in this critical market is so vital to your success. Before making any real estate decisions in a shifting market, give us a call. Let’s talk about your goals, the reality of our current market, and how best to position you to buy, sell or invest in real estate. We look forward to helping you.