the real/estate blog

Can a sale be guaranteed?

Posted in Closing Costs,Real Estate by Cesia Green on January 13, 2012
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It sounds like quite the coincidence, but my roommate from law school also ended up practising in real estate – albeit in a much larger firm in Toronto. I got an email from Mahira a little while ago with a link to a case she thought I would find interesting, and I’ve been wanting to share it. With the new year starting, I thought it was a good time to talk about a very fascinating (to me, at least) subject: the Guaranteed Sales Agreement.

Some realtors will sign agreements with you that if your house doesn’t sell, they will agree to purchase it from you before the end of a set time period. You should always be quite careful when signing these types of agreements though, and have them properly reviewed by your lawyer to ensure that you are happy with all of the terms. This case is a good illustration of that.

David and Tanya Idzan were selling a condo in Edmonton. They listed it with Jack Broadfoot, and explained to him that they were selling because they had bought a new build house. They signed an agreement that stated that the property was to be sold no earlier than January 2008, as their new home would not be ready until then. At the same time that they signed the listing agreement, Jack had them sign a Guaranteed Sales Agreement that listed the proposed purchaser as Fountainhead Financial Inc. The GSA included, among other things, that Fountainhead could elect to either have the existing mortgage discharged or could assume the mortgage; the price would be $225,000, as opposed to the $254,000 that it was initially listed at.

The condo had not sold by early 2008, at which time the Edmonton real estate market had fallen significantly. After several price reductions, the Idzans decided that they would be better off selling to Fountainhead under the GSA than continuing to reduce the price of the condo. However, when the closing was about to occur, Fountainhead’s lawyer indicated that they wanted to assume the mortgage – which was not allowed by the Idzans’ lender. The condo eventually sold for $185,000.

As it turned out, the Idzans had explained to their realtor that their mortgage was not assumable. They would have to pay it out on closing of their condo in order to comply with their lender’s requirements. The realtor had overlooked this and included this term in the GSA. Because of this inconsistency, the court found that the realtor had been negligent and awarded the Idzans $25,000 in damages. Essentially, the realtor had included a term in the GSA that was impossible for the vendors to fulfill from day one.

You can read the entire case, Idzan v. Broadfoot, here.


New or used?

Posted in Closing Costs,Investment Properties,Real Estate by Cesia Green on January 6, 2012
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MoneySense Magazine ran an article back in November on the 10 mistakes people make when buying a brand-new home rather than purchasing a resale property. In order:

  1. Falling in love with the show home
  2. Trusting the floor plan
  3. Not getting a lawyer involved until after you sign the contract
  4. Not getting an inspection from a professional
  5. Accepting delays without any questions
  6. Forgetting that you will be moving into a construction zone
  7. Thinking that you have a warranty [note: Ontario is one of three provinces with mandatory warranties in place]
  8. Procrastinating in submitting a claim under your warranty
  9. Not reviewing estimated closing costs in the agreement
  10. Buying at the wrong time – meaning both after the VIP sales are gone, and pre-build before a change in the market

 There is a lot of truth to all of these points. Buying a new home has a lot of allure to it: you can to customize your house in whatever manner you like. What you need to be aware of is that all builders are not created equal, and, more importantly, builders are in the house-building business to make a living, just like the rest of us. If they can get a buyer to pay for something, they will, and there is nothing illegal or really even underhanded about it.

I see a lot of agreements come in for new homes where the builder has pushed a lot of costs onto the purchaser, such as hydro meter installation, Tarion enrolment fees, Law Society levies, etc.; without proper review of the agreement by the purchaser’s lawyer, the purchaser will be stuck with them. Sometimes I feel like a broken record, but ultimately, if you want to protect yourself, be sure to put in a condition on solicitor review of your agreement and pay a lawyer to look it over before you’re stuck with a house you don’t want any more.

How much will that house cost?

Posted in Closing Costs,Real Estate by Cesia Green on September 9, 2011

I read Money Sense Magazine occasionally. A while ago, I came across a post from Gail Vax-Oxlade, who hosts a show I (secretly) love to watch called Til Debt Do Us Part. She wrote this article to help home buyers figure out what they actually need to save in order to buy their home. Some examples beyond legal fees: tax adjustments, utility hookups, appraisal fees and interest adjustments. There are a lot of extra costs that go into buying a home that are important to remember so that you don’t have a very unpleasant surprise when you see the financial summary at your lawyer’s office. Keep them in mind and you’ll be prepared.